U.S.
SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
(Mark
One)
x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For the
quarterly period ended: September 30, 2009
or
¨
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For the
transition period from ___________________________ to
____________________
Commission
File Number: 1-15087
I.D.
SYSTEMS, INC.
(Exact
name of registrant as specified in its charter)
Delaware
|
|
22-3270799
|
(State
or other jurisdiction of incorporation or organization)
|
|
(I.R.S.
Employer Identification No.)
|
|
|
|
One
University Plaza, Hackensack, New
Jersey
|
|
07601
|
(Address
of principal executive offices)
|
|
(Zip
Code)
|
(201)
996-9000
(Issuer's
telephone number, including area code)
(Former
name, former address and former fiscal year, if changed since last
report)
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes
x
No
¨
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such
files).
Yes
¨
No
¨
Indicate
by check mark whether the registrant is a large accelerated
filer, accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of “large accelerated filer”,
“accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
Large
accelerated filer
¨
Accelerated
filer
x
Non-accelerated
filer
¨
(Do not check if
smaller reporting company)
Smaller
reporting company
¨
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Securities Exchange Act of 1934).
Yes
¨
No
x
The
number of shares of the registrant’s Common Stock, $0.01 par value per share,
outstanding as of the close of business on November 6, 2009 was
11,074,059.
INDEX
I.D.
Systems, Inc. and Subsidiary
|
Page
|
|
|
PART
I - FINANCIAL INFORMATION
|
|
|
|
Item
1. Condensed Consolidated Financial Statements
|
|
|
|
Condensed
Consolidated Balance Sheets as of December 31, 2008
and
September 30, 2009 (unaudited)
|
1
|
|
|
Condensed
Consolidated Statements of Operations (unaudited) -
for
the three months and nine months ended September 30, 2008 and
2009
|
2
|
|
|
Condensed
Consolidated Statement of Changes in Stockholders’ Equity (unaudited) -
for
the nine months ended September 30, 2009
|
3
|
|
|
Condensed
Consolidated Statements of Cash Flows (unaudited) -
for
the nine months ended September 30, 2008 and 2009
|
4
|
|
|
Notes
to Unaudited Condensed Consolidated Financial Statements
|
5
|
|
|
Item
2. Management’s Discussion and Analysis of Consolidated Financial
Condition and Consolidated Results of Operations
|
17
|
|
|
Item
3. Quantitative and Qualitative Disclosures About Market
Risk
|
25
|
|
|
Item
4. Controls and Procedures
|
26
|
|
|
PART
II - OTHER INFORMATION
|
|
|
|
Item
1a. Risk Factors
|
27
|
|
|
Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds
|
27
|
|
|
Item
6. Exhibits
|
27
|
|
|
Signatures
|
28
|
PART
I - FINANCIAL INFORMATION
Item
1. Condensed Consolidated Financial Statements
I.D.
Systems, Inc. and Subsidiary
Condensed
Consolidated Balance Sheets
|
|
December 31, 2008*
|
|
|
September 30,
2009
(Unaudited)
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
12,558,000
|
|
|
$
|
14,496,000
|
|
Restricted
cash
|
|
|
230,000
|
|
|
|
-
|
|
Investments
– short term
|
|
|
8,550,000
|
|
|
|
39,861,000
|
|
Accounts
receivable, net
|
|
|
8,245,000
|
|
|
|
1,938,000
|
|
Unbilled
receivables
|
|
|
168,000
|
|
|
|
248,000
|
|
Inventory,
net
|
|
|
3,273,000
|
|
|
|
5,596,000
|
|
Interest
receivable
|
|
|
217,000
|
|
|
|
245,000
|
|
Prepaid
expenses and other current assets
|
|
|
261,000
|
|
|
|
611,000
|
|
Total
current assets
|
|
|
33,502,000
|
|
|
|
62,995,000
|
|
|
|
|
|
|
|
|
|
|
Investments
– long term
|
|
|
34,911,000
|
|
|
|
9,945,000
|
|
Fixed
assets at cost
|
|
|
2,873,000
|
|
|
|
2,900,000
|
|
Less:
accumulated depreciation
|
|
|
(1,823,000)
|
|
|
|
(1,900,000)
|
|
Net
fixed assets
|
|
|
1,050,000
|
|
|
|
1,000,000
|
|
Goodwill
|
|
|
200,000
|
|
|
|
200,000
|
|
Other
intangible assets
|
|
|
178,000
|
|
|
|
178,000
|
|
Other
assets
|
|
|
107,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
69,948,000
|
|
|
$
|
74,318,000
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
$
|
2,175,000
|
|
|
$
|
599,000
|
|
Line
of credit
|
|
|
-
|
|
|
|
12,643,000
|
|
Deferred
revenue
|
|
|
424,000
|
|
|
|
364,000
|
|
Total
current liabilities
|
|
|
2,599,000
|
|
|
|
13,606,000
|
|
|
|
|
|
|
|
|
|
|
Deferred
revenue
|
|
|
231,000
|
|
|
|
517,000
|
|
Deferred
rent
|
|
|
33,000
|
|
|
|
17,000
|
|
Total
liabilities
|
|
|
2,863,000
|
|
|
|
14,140,000
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS'
EQUITY
|
|
|
|
|
|
|
|
|
Preferred
stock; authorized 5,000,000 shares, $.01 par value; none
issued
|
|
|
—
|
|
|
|
—
|
|
Common
stock; authorized 50,000,000 shares, $.01 par value; 12,082,000 and
12,284,000 shares issued at December 31, 2008 and September 30, 2009,
respectively; shares outstanding, 10,893,000 and 11,075,000 at December
31, 2008 and September 30, 2009, respectively.
|
|
|
120,000
|
|
|
|
120,000
|
|
Additional
paid-in capital
|
|
|
101,437,000
|
|
|
|
103,056,000
|
|
Accumulated
deficit
|
|
|
(23,667,000)
|
|
|
|
(32,100,000)
|
|
Accumulated
other comprehensive income
|
|
|
46,000
|
|
|
|
18,000
|
|
|
|
|
77,936,000
|
|
|
|
71,094,000
|
|
Treasury
stock; 1,189,000 shares and 1,209,000 shares at cost at December 31, 2008
and September 30, 2009 respectively.
|
|
|
(10,851,000)
|
|
|
|
(10,916,000)
|
|
Total
stockholders’ equity
|
|
|
67,085,000
|
|
|
|
60,178,000
|
|
Total
liabilities and stockholders’ equity
|
|
$
|
69,948,000
|
|
|
$
|
74,318,000
|
|
* Derived
from audited balance sheet as of December 31, 2008.
See
accompanying notes to condensed consolidated financial
statements.
I.D.
Systems, Inc. and Subsidiary
Condensed
Consolidated Statements of Operations
(Unaudited)
|
|
Three months ended
September 30,
|
|
|
Nine months ended
September 30,
|
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
Products
|
|
$
|
7,360,000
|
|
|
$
|
1,218,000
|
|
|
$
|
14,084,000
|
|
|
$
|
4,367,000
|
|
Services
|
|
|
1,977,000
|
|
|
|
623,000
|
|
|
|
5,041,000
|
|
|
|
3,093,000
|
|
|
|
|
9,337,000
|
|
|
|
1,841,000
|
|
|
|
19,125,000
|
|
|
|
7,460,000
|
|
Cost
of revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of products
|
|
|
3,622,000
|
|
|
|
603,000
|
|
|
|
6,836,000
|
|
|
|
2,291,000
|
|
Cost
of services
|
|
|
948,000
|
|
|
|
339,000
|
|
|
|
2,545,000
|
|
|
|
1,209,000
|
|
|
|
|
4,570,000
|
|
|
|
942,000
|
|
|
|
9,381,000
|
|
|
|
3,500,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
Profit
|
|
|
4,767,000
|
|
|
|
899,000
|
|
|
|
9,744,000
|
|
|
|
3,960,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative expenses
|
|
|
3,910,000
|
|
|
|
3,644,000
|
|
|
|
12,449,000
|
|
|
|
11,619,000
|
|
Research
and development expenses
|
|
|
672,000
|
|
|
|
642,000
|
|
|
|
2,091,000
|
|
|
|
2,022,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from operations
|
|
|
185,000
|
|
|
|
(3,387,000
|
)
|
|
|
(4,796,000
|
)
|
|
|
(9,681,000
|
)
|
Interest
income
|
|
|
434,000
|
|
|
|
284,000
|
|
|
|
1,853,000
|
|
|
|
913,000
|
|
Interest
expense
|
|
|
—
|
|
|
|
(44,000
|
)
|
|
|
—
|
|
|
|
(87,000
|
)
|
Other
income, net
|
|
|
—
|
|
|
|
110,000
|
|
|
|
—
|
|
|
|
422,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
$
|
619,000
|
|
|
$
|
(3,037,000
|
)
|
|
$
|
(2,943,000
|
)
|
|
$
|
(8,433,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) per share – basic and diluted
|
|
$
|
0.06
|
|
|
$
|
(0.27
|
)
|
|
$
|
(0.27
|
)
|
|
$
|
(0.77
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares outstanding – basic
|
|
|
10,915,000
|
|
|
|
11,075,000
|
|
|
|
10,885,000
|
|
|
|
10,963,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares outstanding – diluted
|
|
|
11,175,000
|
|
|
|
11,075,000
|
|
|
|
10,885,000
|
|
|
|
10,963,000
|
|
See
accompanying notes to condensed consolidated financial
statements.
I.D.
Systems, Inc. and Subsidiary
Condensed
Consolidated Statement of Changes in Stockholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
Additional
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
Paid-in
|
|
|
Accumulated
|
|
|
Comprehensive
|
|
|
Treasury
|
|
|
Stockholders'
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Income (loss)
|
|
|
Stock
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at December 31, 2008
|
|
|
12,082,000
|
|
|
$
|
120,000
|
|
|
$
|
101,437,000
|
|
|
$
|
(23,667,000
|
)
|
|
$
|
46,000
|
|
|
$
|
(10,851,000
|
)
|
|
$
|
67,085,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,433,000
|
)
|
|
|
|
|
|
|
|
|
|
|
(8,433,000
|
)
|
Comprehensive
loss - unrealized loss on investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(28,000
|
)
|
|
|
|
|
|
|
(28,000
|
)
|
Total
comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,461,000
|
)
|
Shares
issued pursuant to exercise of stock options
|
|
|
1,000
|
|
|
|
|
|
|
|
2,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,000
|
|
Shares
withheld pursuant to issuance
of
restricted and performance stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(65,000
|
)
|
|
|
(65,000
|
)
|
Issuance
of restricted and performance stock
|
|
|
201,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
based compensation –restricted stock
|
|
|
|
|
|
|
|
|
|
|
149,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
149,000
|
|
Stock
based compensation - options
|
|
|
|
|
|
|
|
|
1,468,000
|
|
|
|
|
|
|
|
|
|
|
|
|
1,468,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at September 30, 2009 (Unaudited)
|
|
|
12,284,000
|
|
|
$
|
120,000
|
|
|
$
|
103,056,000
|
|
|
$
|
(32,100,000)
|
|
|
$
|
18,000
|
|
|
$
|
(10,916,000)
|
|
|
$
|
60,178,000
|
|
See
accompanying notes to condensed consolidated financial
statements.
I.D.
Systems, Inc. and Subsidiary
Condensed
Consolidated Statements of Cash Flows
(Unaudited)
|
|
Nine months ended
September 30,
|
|
|
|
2008
|
|
|
2009
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(2,943,000
|
)
|
|
$
|
(8,433,000
|
)
|
Adjustments
to reconcile net loss to cash used in operating
activities:
|
|
|
|
|
|
|
|
|
Inventory
reserve
|
|
|
126,000
|
|
|
|
|
|
Bad
debt expense
|
|
|
|
|
|
|
(132,000)
|
|
Accrued
interest income
|
|
|
(117,000)
|
|
|
|
(28,000)
|
|
Stock-based
compensation expense
|
|
|
2,307,000
|
|
|
|
1,617,000
|
|
Depreciation
and amortization
|
|
|
340,000
|
|
|
|
404,000
|
|
Change
in fair value of investments
|
|
|
—
|
|
|
|
(422,000)
|
|
Deferred
rent expense
|
|
|
(16,000
|
)
|
|
|
(16,000
|
)
|
Deferred
revenue
|
|
|
545,000
|
|
|
|
226,000
|
|
Changes
in:
|
|
|
|
|
|
|
|
|
Restricted
cash
|
|
|
—
|
|
|
|
230,000
|
|
Accounts
receivable
|
|
|
(6,830,000
|
)
|
|
|
6,439,000
|
|
Unbilled
receivables
|
|
|
(318,000
|
)
|
|
|
(80,000)
|
|
Inventory
|
|
|
2,031,000
|
|
|
|
(2,323,000
|
)
|
Prepaid
expenses and other assets
|
|
|
(126,000)
|
|
|
|
(243,000)
|
|
Accounts
payable and accrued expenses
|
|
|
(764,000
|
)
|
|
|
(1,641,000)
|
)
|
Net
cash used in operating activities
|
|
|
(5,765,000
|
)
|
|
|
(4,402,000
|
)
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
Purchase
of fixed assets
|
|
|
(60,000
|
)
|
|
|
(354,000
|
)
|
Business
acquisition
|
|
|
(573,000)
|
|
|
|
|
|
Purchase
of investments
|
|
|
(21,163,000
|
)
|
|
|
(46,134,000
|
)
|
Maturities
of investments
|
|
|
31,917,000
|
|
|
|
40,183,000
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by (used in) investing activities
|
|
|
10,121,000
|
|
|
|
(6,305,000
|
)
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
Repayment
of term loan
|
|
|
(19,000
|
)
|
|
|
|
|
Proceeds
from exercise of stock options
|
|
|
1,377,000
|
|
|
|
2,000
|
|
Purchase
of treasury shares
|
|
|
(4,094,000
|
)
|
|
|
|
|
Borrowing
on line of credit
|
|
|
—
|
|
|
|
12,900,000
|
|
Principal
payments on line of credit
|
|
|
—
|
|
|
|
(257,000
|
)
|
|
|
|
|
|
|
|
|
|
Net
cash (used in) provided by financing activities
|
|
|
(2,736,000
|
)
|
|
|
12,645,000
|
|
Net
increase in cash and cash equivalents
|
|
|
1,620,000
|
|
|
|
1,938,000
|
|
Cash
and cash equivalents - beginning of period
|
|
|
5,103,000
|
|
|
|
12,558,000
|
|
Cash
and cash equivalents - end of period
|
|
$
|
6,723,000
|
|
|
|
14,496,000
|
|
Supplemental
disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
Cash
paid for:
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
—
|
|
|
$
|
87,000
|
|
Noncash
activities:
|
|
|
|
|
|
|
|
|
Unrealized
loss on investments
|
|
$
|
(424,000
|
)
|
|
$
|
(28,000)
|
|
Shares
withheld pursuant to stock issuance
|
|
$
|
—
|
|
|
$
|
65,000
|
|
See
accompanying notes to condensed consolidated financial
statements.
I.D.
Systems, Inc. and Subsidiary
Notes to
Unaudited Condensed Consolidated Financial Statements
September
30, 2009
NOTE
A - THE COMPANY
I.D.
Systems, Inc. (the “Company”) develops, markets and sells wireless solutions for
managing and securing high-value enterprise assets. These assets include
industrial vehicles, such as forklifts and airport ground support equipment, and
rental vehicles. The Company’s patented Wireless Asset Net system, which
utilizes radio frequency identification, or RFID, technology, addresses the
needs of organizations to control, track, monitor and analyze their assets. The
Company’s solutions enable customers to achieve tangible economic benefits by
making timely, informed decisions that increase the security, productivity and
efficiency of their operations. The Company outsources its hardware
manufacturing operations to contract manufacturers. The Company was incorporated
in Delaware in 1993 and commenced operations in January 1994.
NOTE
B – Organization and Consolidation Policy
The
unaudited interim condensed consolidated financial statements include the
accounts of I.D. Systems, Inc. (the “Company”) and its wholly owned foreign
subsidiary I.D. Systems, GmbH (“GmbH”). All material intercompany balances and
transactions have been eliminated in consolidation. The accompanying unaudited
condensed consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America
(“U.S. GAAP”) for interim financial information and with the instructions to
Form 10-Q. Accordingly, they do not include all of the information
and footnotes required by U.S. GAAP for complete financial
statements. In the opinion of management, such statements include all
adjustments (consisting only of normal recurring items) which are considered
necessary for a fair presentation of the consolidated financial position of the
Company as of September 30, 2009, the consolidated results of its operations for
the three- and nine- month periods ended September 30, 2008 and 2009,
respectively, the consolidated change in stockholders’ equity for the nine
months ended September 30, 2009 and consolidated cash flows for the nine-month
periods ended September 30, 2008 and 2009. The results of operations
for the nine-month period ended September 30, 2009 are not necessarily
indicative of the operating results for the full year. It is
suggested that these financial statements be read in conjunction with the
financial statements and related disclosures for the year ended December 31,
2008 included in the Company's Annual Report on Form 10-K.
NOTE
C – Cash and Cash Equivalents
The
Company considers all highly liquid debt instruments purchased with an original
maturity of three months or less to be cash equivalents unless they are
legally or contractually restricted. The Company’s cash and cash
equivalent balances exceed FDIC limits.
NOTE
D – Investments
The
Company’s investments include debt securities, government and state agency
bonds, corporate bonds and auction rate securities, which are classified as
either available for sale, held to maturity or trading, depending on
management’s investment intentions relating to these securities. Available for
sale securities are marked to market based on quoted market values of the
securities, with the unrealized gain and (losses), reported as comprehensive
income or (loss). For the three- and nine- month periods ended September 30,
2009, the Company reported unrealized loss of $22,000 and $28,000, respectively,
on available for sale securities in comprehensive loss. Investments categorized
as held to maturity are carried at amortized cost because the Company has both
the intent and the ability to hold these investments until they mature. The
Company has classified as short-term those securities that mature within one
year, and all other securities are classified as long-term.
The
Company’s investments include auction rate securities (“ARS”) and an auction
rate securities right (“ARSR”), each as described below.
The
Company has classified its ARS investments as trading securities as set forth in
Financial Accounting Standards Board (“FASB”) Accounting Standard
Codification (“ASC”) ASC 320 Investments - Debt and Equity Securities and has
elected to account for its ARSR investment using the provisions of FASB ASC
820. Trading securities are carried at fair value, with unrealized
holding gains and losses included in other income (expense) on the Company’s
consolidated statements of operations.
At
September 30, 2009, the Company held approximately $20.4 million par value
in ARS ($20.5 million fair value including the ARSR, which was valued at $1.8
million at September 30, 2009). These ARS represent interests in collateralized
pools of student loan receivables issued by agencies established by
counties, cities, states and other municipal entities within the United
States. Liquidity for these ARS is typically provided by an auction
process that resets the applicable interest rate at pre-determined
intervals. In February 2008 and continuing in 2009, these securities
failed to sell at auction. These failed auctions represent liquidity risk
exposure and are not defaults or credit events. As a holder of the
securities, the Company continues to receive interest on the ARS, and the
securities continue to be auctioned at the pre-determined intervals (typically
every 28 days) until the auction succeeds, the issuer calls the securities, or
they mature.
The
Company purchased all of the ARS it holds from UBS AG (“UBS”). In October 2008,
the Company received an offer (the “Offer”) from UBS for a put right (the
“ARSR”) permitting the Company to sell to UBS at par value all
of the Company's ARS at a future date (any time during a two-year
period beginning June 30, 2010). The Offer also included a commitment
from UBS to loan the Company 75% of the UBS-determined value of the
ARS at any time until the put is exercised at a variable interest rate that will
equal the lesser of: (i) the applicable reference rate plus a spread set forth
in the applicable credit agreement and (ii) the then-applicable weighted average
interest or dividend rate paid to the Company by the issuer of the ARS that is
pledged to UBS as collateral. The Offer was non-transferable and expired on
November 14, 2008. During November 2008, the Company
accepted the Offer. In exchange for the Offer, the Company provided UBS with a
general release of claims (other than certain consequential damages claims)
concerning the Company’s ARS and granted UBS the right to purchase the Company's
ARS at any time for full par value.
The
Company’s right under the ARSR is in substance a put option with the strike
price equal to the par value of the ARS. The Company records this
right as an asset and measures it at fair value, with the resultant gain or loss
recognized in earnings. The Company has classified the ARS as trading
securities. The Company recognized the following gain or (loss) in the condensed
consolidated statement of operations for the three and nine months ended
September 30, 2009 from the change in the fair value of these
instruments:
Three months ended September 30, 2009
|
|
Fair Value at June
30, 2009
|
|
|
Net
Purchases
(Sales)
|
|
|
Unrealized
Gain
(Loss)
|
|
|
Fair Value at
September 30, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Auction
Rate Securities
|
|
$
|
18,681,000
|
|
|
$
|
(50,000
|
)
|
|
$
|
9,000
|
|
|
$
|
18,640,000
|
|
Auction
Rate Securities – Rights
|
|
|
1,718,000
|
|
|
|
-
|
|
|
|
101,000
|
|
|
|
1,819,000
|
|
Net
unrealized gain recorded for the
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
three
months ended September 30, 2009
|
|
$
|
20,399,000
|
|
|
$
|
(50,000
|
)
|
|
$
|
110,000
|
|
|
$
|
20,459,000
|
|
Nine months ended September 30, 2009
|
|
Fair Value at
December 31, 2008
|
|
|
Net
Purchases
(Sales)
|
|
|
Unrealized
Gain
(Loss)
|
|
|
Fair Value at
September 30, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Auction
Rate Securities
|
|
$
|
18,117,000
|
|
|
$
|
(50,000
|
)
|
|
$
|
573,000
|
|
|
$
|
18,640,000
|
|
Auction
Rate Securities – Rights
|
|
|
1,970,000
|
|
|
|
-
|
|
|
|
(151,000
|
)
|
|
|
1,819,000
|
|
Net
unrealized gain recorded for the
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
three
months ended September 30, 2009
|
|
$
|
20,087,000
|
|
|
$
|
(50,000
|
)
|
|
$
|
422,000
|
|
|
$
|
20,459,000
|
|
The fair
value of the ARSR was based on an approach in which the present value of all
expected future cash flows was subtracted from the current fair market value of
the security and the resultant value was calculated as a future value at an
interest rate reflective of counterparty risk.
Given the
substantial dislocation in the financial markets and among financial services
companies, there can be no assurance that UBS ultimately will have the ability
to repurchase the Company's auction rate securities at par, or at any other
price, as these rights will be an unsecured contractual obligation of UBS, or
that if UBS determines to purchase the Company's ARS at any time, the Company
will be able to reinvest the cash proceeds of any such sale at the same interest
rate or dividend yield currently being paid to the Company. Also, as
a condition of accepting the ARSR, the Company was required to sign a release of
claims against UBS, which will prevent the Company from making claims against
UBS related to the Company's investment in ARS, other than claims for
consequential damages.
The cost,
gross unrealized gains (losses) and fair value of available for sale, held to
maturity and trading securities by major security type at September 30, 2009 are
as follows:
September 30, 2009
|
|
Cost
|
|
|
Unrealized
Gain
|
|
|
Unrealized
Loss
|
|
|
Fair
Value
|
|
Investments -
short term
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading
securities
|
|
|
|
|
|
|
|
|
|
|
|
|
Auction
Rate
|
|
$
|
20,375,000
|
|
|
|
|
|
$
|
(1,735,000
|
)
|
|
$
|
18,640,000
|
|
Auction
Rate Securities- Right
|
|
|
|
|
|
$
|
1,819,000
|
|
|
|
|
|
|
|
1,819,000
|
|
Total
trading securities
|
|
|
20,375,000
|
|
|
|
1,819,000
|
|
|
|
(1,735,000
|
)
|
|
|
20,459,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available
for sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government
Agency
|
|
|
17,966,000
|
|
|
|
54,000
|
|
|
|
(5,000
|
)
|
|
|
18,015,000
|
|
Total
available for sale
|
|
|
17,966,000
|
|
|
|
54,000
|
|
|
|
(5,000
|
)
|
|
|
18,015,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held
to maturity securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government
Agency
|
|
|
1,133,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,133,000
|
|
Corporate
Bonds and Commercial Paper
|
|
|
254,000
|
|
|
|
|
|
|
|
|
|
|
|
254,000
|
|
Total
held to maturity
|
|
|
1,387,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,387,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investments
- short term
|
|
|
39,728,000
|
|
|
|
1,873,000
|
|
|
|
(1,740,000
|
)
|
|
|
39,861,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable
securities - long term
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available
for sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US
Treasury Notes
|
|
|
703,000
|
|
|
|
8,000
|
|
|
|
-
|
|
|
|
711,000
|
|
Total
available for sale
|
|
|
703,000
|
|
|
|
8,000
|
|
|
|
-
|
|
|
|
711,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held
to maturity securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US
Treasury Notes
|
|
|
1,556,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,556,000
|
|
Government
Agency
|
|
|
3,212,000
|
|
|
|
|
|
|
|
|
|
|
|
3,212,000
|
|
Corporate
Bonds and Commercial Paper
|
|
|
4,466,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,466,000
|
|
Total
held to maturity securities
|
|
|
9,234,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
9,234,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investments
- long term
|
|
|
9,937,000
|
|
|
|
8,000
|
|
|
|
-
|
|
|
|
9,945,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
investments
|
|
$
|
49,665,000
|
|
|
$
|
1,881,000
|
|
|
$
|
(1,740,000
|
)
|
|
$
|
49,806,000
|
|
NOTE
E – Inventory
Inventory,
which primarily consists of finished goods and components used in the Company’s
products, is stated at the lower of cost or market using the first-in first-out
(FIFO) method.
NOTE
F – Unbilled Receivables and Deferred Revenue
Under
certain customer contracts, the Company invoices progress billings once certain
milestones are met. As the systems are delivered, and services are performed and
all of the criteria for revenue recognition are satisfied, the Company
recognizes revenue. If the amount of revenue recognized for financial reporting
purposes is greater than the amount invoiced, an unbilled receivable is
recorded. If the amount invoiced is greater than the amount of revenue
recognized for financial reporting purposes, deferred revenue is recorded. At
December 31, 2008 and September 30, 2009, unbilled receivables were $168,000 and
$248,000, respectively, and deferred revenue was $655,000 and $881,000,
respectively.
NOTE
G – Goodwill and Intangible Assets
On April
18, 2008, the Company acquired PowerKey, the industrial vehicle monitoring
products division of International Electronics, Inc., a manufacturer of access
control and security equipment, for approximately $573,000, which includes
approximately $73,000 of direct acquisition costs. The tangible assets acquired
include inventory (totaling approximately $191,000), and fixed assets (totaling
approximately $4,000).
Allocation
of the purchase price of the intangible assets consists of the following:
goodwill (totaling approximately $200,000), trademarks and trade names (totaling
approximately $74,000), and a customer list (totaling approximately $104,000)
resulting from the acquisition of PowerKey are carried at cost. The Company will
test the goodwill and intangible assets on an annual basis in the fourth quarter
or more frequently if the Company believes indicators of impairment
exist.
At
December 31, 2008, the Company determined that no impairment existed to the
goodwill, customer list and trademark and trade name, its acquired intangible
assets. The Company also determined that the use of indefinite lives for the
customer list and trademark and trade name remains applicable at December 31,
2008 and the Company expects to derive future benefits from these intangible
assets. As of September 30, 2009, there were no indications of
impairment.
NOTE
H - Net Loss Per Share of Common Stock
Net
loss per share for the three months and nine months ended September 30, 2008 and
2009 are as follows:
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
Basic and diluted loss per
share
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
$
|
619,000
|
|
|
$
|
(3,037,000
|
)
|
|
$
|
(2,943,000
|
)
|
|
$
|
(8,433,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding- basic
|
|
|
10,915,000
|
|
|
|
11,075,000
|
|
|
|
10,885,000
|
|
|
|
10,963,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
net income (loss) per share
|
|
$
|
0.06
|
|
|
$
|
(0.27
|
)
|
|
$
|
(0.27
|
)
|
|
$
|
(0.77
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding- diluted
|
|
|
11,175,000
|
|
|
|
11,075,000
|
|
|
|
10,885,000
|
|
|
|
10,963,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
net income (loss) per share
|
|
$
|
0.06
|
|
|
$
|
(0.27
|
)
|
|
$
|
(0.27
|
)
|
|
$
|
(0.77
|
)
|
Basic
income per share is based on the weighted average number of common shares
outstanding during each period. Diluted income per share reflects the potential
dilution assuming common shares were issued upon the exercise of outstanding
options and the proceeds thereof were used to purchase outstanding common
shares. For the three-month period ended September 30, 2008, diluted weighted
average shares outstanding included the dilutive effect from potential exercise
of outstanding stock options. For the nine-month period ended
September 2008 and three and nine-month periods ended September 30, 2009, the
basic and diluted weighted average shares outstanding were the same since the
effect from the potential exercise of outstanding stock options would have been
anti-dilutive. For the nine months ended September 30, 2008, the number of
stock awards excluded from the computation was 2.3 million. For the three
and nine months ended September 30, 2009, the number of stock awards
excluded from the computation was 2.6 million.
NOTE
I – Revenue Recognition
The
Company's revenues are derived from contracts with multiple element
arrangements, which include the Company's system, training and technical
support. Revenue is allocated to each element based upon vendor specific
objective evidence (VSOE) of the fair value of the element. VSOE of the fair
value is based upon the price charged when the element is sold separately.
Revenue is recognized as each element is earned based on the selling price of
each element and when there are no undelivered elements that are essential to
the functionality of the delivered elements. The Company's system is typically
implemented by the customer or a third party and, as a result, revenue is
recognized when title and risk of loss passes to the customer, which usually is
when the system has been delivered, persuasive evidence of an arrangement
exists, sales price is fixed and determinable, collectability is reasonably
assured and contractual obligations have been satisfied. Training and technical
support revenue is generally recognized at time of performance.
The
Company also enters into post-contract maintenance and support agreements.
Revenue is recognized over the service period and the cost of providing these
services is expensed as incurred
.
NOTE
J – Stock-based Compensation Plans
The
Company adopted the 1995 Stock Option Plan, pursuant to which the Company had
the right to grant options to purchase up to an aggregate of 1,250,000 shares of
common stock. The Company also adopted the 1999 Stock Option Plan, pursuant to
which the Company had the right to grant stock awards and options to purchase up
to 2,813,000 shares of common stock. The Company also adopted the 1999 Director
Option Plan, pursuant to which the Company had the right to grant options to
purchase up to an aggregate of 600,000 shares of common
stock.
The
Company adopted the 2007 Equity Compensation Plan, pursuant to which the
Company may grant options to purchase up to an aggregate of 2,000,000 shares of
common stock. The Company also adopted the 2009 Non-Employee Director
Equity Compensation Plan, pursuant to which the Company may grant options to
purchase up to an aggregate of 300,000 shares of common stock. The plans are
administered by the Compensation Committee of the Company’s Board of Directors,
which has the authority to determine, among other things, the term during which
an option may be exercised (not more than 10 years), the exercise price of an
option and the vesting provisions.
The
Company recognizes all share-based payments in the statement of operations as an
operating expense, based on their fair values on the applicable grant date. As a
result, the Company recorded $519,000 and $488,000 in stock-based compensation
expense for the three-month periods ended September 30, 2008 and 2009,
respectively, and a $1,637,000 and $1,468,000 expense for the nine-month periods
ended September 30, 2008 and 2009, respectively.
The
following table summarizes the activity of the Company’s stock options for the
nine months ended September 30, 2009:
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
Weighted
|
|
Average
|
|
|
|
|
|
|
|
|
Average
|
|
Remaining
|
|
Aggregate
|
|
|
|
|
|
|
Exercise
|
|
Contractual
|
|
Intrinsic
|
|
|
|
Options
|
|
|
Price
|
|
Term
|
|
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
at beginning of year
|
|
|
2,601,000
|
|
|
$
|
9.81
|
|
|
|
|
|
Granted
|
|
|
317,000
|
|
|
|
3.58
|
|
|
|
|
|
Exercised
|
|
|
(1,000)
|
|
|
|
2.31
|
|
|
|
|
|
Forfeited
|
|
|
(268,000
|
)
|
|
|
11.44
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
at end of period
|
|
|
2,649,000
|
|
|
$
|
8.91
|
|
6 years
|
|
$
|
186,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable
at end of period
|
|
|
1,623,000
|
|
|
$
|
9.53
|
|
4 years
|
|
$
|
64,000
|
|
As of
September 30, 2009, there was approximately $3,404,000 of unrecognized
compensation cost related to non-vested options granted under the Company’s
option plans. That cost is expected to be recognized over a weighted average
period of 1.88 years.
The fair
value of each option grant on the date of grant is estimated using the
Black-Scholes option-pricing model reflecting the following weighted average
assumptions:
|
|
September
30
|
|
|
|
2008
|
|
|
2009
|
|
Expected
volatility
|
|
|
72%
- 76
|
%
|
|
|
54%
- 76
|
%
|
Expected
life of options
|
|
5
years
|
|
|
5
years
|
|
Risk
free interest rate
|
|
|
3
|
%
|
|
|
2
|
%
|
Dividend
yield
|
|
|
0
|
%
|
|
|
0
|
%
|
Expected
volatility is based on historical volatility of the Company’s stock and the
expected life of options is based on historical data with respect to employee
exercise periods.
The
weighted average fair value of options granted during the nine months ended
September 30, 2008 and 2009 was $4.95 and $1.85, respectively. The total
intrinsic value of options exercised during the nine months ended September 30,
2008 and 2009 was $1,785,000 and $1,700, respectively.
The
Company estimates forfeitures at the time of valuation and reduces expense
ratably over the vesting period. This estimate is adjusted periodically based on
the extent to which actual forfeitures differ, or are expected to differ, from
the previous estimate.
NOTE
K – Line of Credit
In
October 2008, the Company received an offer (the “Offer”) from UBS for a put
right (the “ARSR”) permitting the Company to sell to UBS at par
value all ARS held by the Company, all of which were purchased
by the Company from UBS, at a future date (any time during a two-year
period beginning June 30, 2010). Included as part of the Offer, the
Company received a commitment to obtain a loan for 75% of the
UBS-determined value of the ARS at any time until the put option is exercised at
a variable interest rate (1.33% at September 30, 2009) that will equal the
lesser of: (i) the applicable reference rate plus a spread set forth in the
applicable credit agreement and (ii) the then-applicable weighted average
interest or dividend rate paid to the Company by the issuer of the ARS that is
pledged to UBS as collateral. The Company accepted the Offer in November 2008.
In March 2009, the Company borrowed $12,900,000 (which amount was equal to 75%
of the UBS-determined value of the ARS) against this credit
facility. Principal payments reduced the Company’s obligation to
$12,643,000 at September 30, 2009. This line of credit facility is payable on
demand.
NOTE
L – Restricted Stock
The fair
value of each share granted is based on the Company’s closing stock price on the
date of the grant. A summary of the non-vested shares for the nine months ended
September 30, 2009 is as follows:
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
Non-vested
Shares
|
|
|
Grant Date
Fair Value
|
|
|
|
|
|
|
|
|
Non-vested
at January 1, 2009
|
|
|
31,000
|
|
|
$
|
9.49
|
|
Granted
|
|
|
161,000
|
|
|
|
3.54
|
|
Vested
|
|
|
(20,000
|
)
|
|
|
10.55
|
|
Forfeited
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-vested
at September 30, 2009
|
|
|
172,000
|
|
|
$
|
3.78
|
|
The
Company recorded $72,000 and $71,000 in stock-based compensation expense for the
three-month periods ended September 30, 2008 and 2009, respectively, and a
$451,000 and $149,000 in expense for the nine months ended September 30, 2008
and 2009, respectively, in connection with restricted stock grants. As of
September 30, 2009, there was $553,000 of total unrecognized compensation cost
related to non-vested shares. That cost is expected to be recognized over a
weighted average period of 2.6 years.
NOTE
M – Performance Shares
In June
2009, the Compensation Committee granted 233,000 performance shares to key
employees pursuant to the 2007 Equity Compensation Plan. The issuance of the
shares of the Company’s common stock underlying the performance shares is
subject to the achievement of stock price targets of the Company’s common stock
at the end of a three-year measurement period ending in January 2012 with the
ability to achieve prorated performance shares during interim annual measurement
periods from January 31, 2009 to January 31, 2012. January of each year from
2009 to 2012 is used as the interim measurement date since it is assumed
earnings announcements will take place in January with respect to the subsequent
year end. If performance is not met, the performance shares will not vest and
will automatically be returned to the Plan. If the performance trigger is met,
then the shares will be issued to the employees. As of September 30, 2009, the
Company cannot determine if it will achieve the three-year stock price target
that will trigger the issuances of performance shares and therefore has not
recorded compensation expense in connection with these performance share
grants.
NOTE
N – Income Taxes
The
Company accounts for income taxes under the asset and liability approach.
Deferred tax assets and liabilities are recognized for the expected future tax
consequences attributed to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax basis.
Deferred tax assets and liabilities are measured using the enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to reverse. As of September 30, 2009, the Company had
provided a valuation allowance to fully reserve its net operating loss carry
forwards, primarily as a result of anticipated net losses for income tax
purposes.
NOTE
O − Fair Value of Financial Instruments
The
carrying amounts of cash equivalents, accounts receivable, and investments in
securities, including ARS and the ARSR, are carried at fair value and accounts
payable, line of credit, and other liabilities approximate their fair values due
to the short period to maturity of these instruments. The fair value of
the ARS was determined utilizing a discounted cash flow approach and market
evidence with respect to the ARS’ collateral, ratings and insurance to assess
default risk, credit spread risk and downgrade risk.
NOTE
P- Concentration of Customers
Three
customers accounted for 27%, 19% and 12% of the Company’s revenue during the
nine-month period ended September 30, 2009. The same three customers accounted
for 25%, 16% and 13%, respectively, of the Company’s accounts receivable and
unbilled receivables as of September 30, 2009. In addition, one other customer
accounted for 18% of the Company’s accounts receivable and unbilled receivables
as of September 30, 2009.
One
customer accounted for 80% of the Company’s revenue during the nine-month period
ended September 30, 2008. This same customer accounted for 80% of the Company’s
accounts receivable and unbilled receivables as of September 30,
2008.
NOTE
Q – Stock Repurchase Program
On May 3,
2008, the Company announced that its Board of Directors had authorized the
repurchase of issued and outstanding shares of its common stock having an
aggregate value of up to $10,000,000 pursuant to a share repurchase program
established under Rule 10b-18 of the Securities Exchange Act of 1934, as
amended. The amount and timing of such repurchases are dependent upon
the price and availability of shares, general market conditions and the
availability of cash, as determined at the discretion of the Company’s
management. The repurchases are funded from the Company’s working
capital. The Company’s share repurchase program does not have an
expiration date, and the Company may discontinue or suspend the share repurchase
program at any time. All shares of common stock
repurchased under the Company’s share repurchase program are held as treasury
stock. As of September 30, 2009, the Company has purchased approximately
1,075,000 shares in open market transactions under the program for an aggregate
of approximately $9,970,000 or an average cost of $9.27 per share.
NOTE
R - Comprehensive Loss
Comprehensive
loss includes net loss, unrealized losses on available-for-sale marketable
securities and changes in the Company’s foreign currency translation adjustment
account. Cumulative unrealized gains and losses on available-for-sale marketable
securities are reflected as accumulated other comprehensive loss in consolidated
stockholders’ equity on the Company’s consolidated balance sheet. Also reported
in other comprehensive income/loss are changes in the foreign currency
translation adjustment account resulting from translation of the Company’s
wholly owned foreign subsidiary financial statements to U.S.
dollars.
For
the nine months ended September 30, 2009, comprehensive loss was
$8,461,000, which includes a net loss of $8,433,000 and an unrealized loss on
available-for-sale marketable securities of $28,000.
NOTE
S - Use of Estimates
The
preparation of financial statements in conformity with U.S. GAAP requires the
use of estimates and assumptions by management that affect reported amounts of
assets and liabilities and disclosures of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. The most significant estimates relate to
stock-based compensation arrangements and the fair value of the Company’s
investments in auction rate securities and the auction rate securities right
(See Note U –Fair Value Measurements). Actual results could differ from these
estimates.
NOTE
T - Commitments and Contingencies
The
Company is not currently subject to any material commitments and legal
proceedings, nor to management’s knowledge is any material legal proceeding
threatened against the Company.
NOTE
U - Fair Value Measurements
The
Company utilizes a fair value hierarchy that prioritizes the inputs to valuation
techniques used to measure fair value into three broad levels. The following is
a brief description of those levels:
|
§
|
Level
1: Unadjusted quoted prices in active markets for identical assets or
liabilities.
|
|
§
|
Level
2: Inputs other than quoted prices that are observable for the asset or
liability, either directly or indirectly. These include quoted prices for
similar assets or liabilities in active markets and quoted prices for
identical or similar assets or liabilities in markets that are not
active.
|
|
§
|
Level
3: Unobservable inputs that reflect the reporting entity’s own
assumptions.
|
The
following table summarizes the bases used by the Company’s broker-dealer to
measure certain assets and liabilities at fair value on a recurring basis in the
consolidated balance sheet:
|
|
Balance at
September
30,
|
|
|
Basis of Fair Value Measurements
|
|
|
|
2009
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
Equivalents
|
|
$
|
2,760,000
|
|
|
$
|
2,760,000
|
|
|
|
|
|
|
|
|
|
Marketable
securities – short term
|
|
|
39,861,000
|
|
|
|
19,402,000
|
|
|
$
|
—
|
|
|
$
|
20,459,000
|
|
Marketable
securities – long term
|
|
|
9,945,000
|
|
|
|
9,945,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
$
|
52,566,000
|
|
|
$
|
32,107,000
|
|
|
$
|
—
|
|
|
$
|
20,459,000
|
|
The table
below includes a roll forward of the Company’s investments in ARS and the ARSR
from January 1, 2009 to September 30, 2009:
Fair
value, January 1, 2009
|
|
$
|
20,087,000
|
|
Net
purchases (maturities)
|
|
|
(50,000)
|
|
Unrealized
gain included in condensed consolidated statement of
operations
|
|
|
422,000
|
|
Fair
value, September 30, 2009
|
|
$
|
20,459,000
|
|
NOTE
V – Wholly Owned Foreign Subsidiary
In May
2009, the Company formed an entity in Germany - I.D. Systems, GmbH (the “GmbH”).
This foreign entity is wholly owned by I.D. Systems, Inc. The GmbH financial
statements are combined and consolidated with the financial statements of I.D.
Systems, Inc. The objective of forming this organization is to streamline the
Company’s growing European operations thereby affording the Company the benefits
of having a company registered in that international market.
For the
period from May 15, 2009 (inception) to September 30, 2009, the GmbH’s
operations resulted in a net loss of $121,000. Total assets were $329,000. The
GmbH operates in a local currency environment using the Euro as its functional
currency.
Existing
I.D. Systems, Inc. European sales orders/contracts and related accounting
activity will remain in I.D. Systems, Inc., the U.S. company, until settled or
completed. Existing European employees and contractors and their related
agreements were transferred to the GmbH in August 2009.
NOTE
W – Foreign Operations
Income
and expense accounts of foreign operations are translated at actual or weighted
average exchange rates during the period. Assets and liabilities of foreign
operations that operate in a local currency environment are translated to U.S.
dollars at the exchange rates in effect at the balance sheet date, with the
related translation gains or losses reported as components of accumulated other
comprehensive income/loss in consolidated stockholders’ equity. The translation
of the GmbH’s financial statements at September 30, 2009 resulted in an
immaterial translation loss of less than $200 which is included in comprehensive
loss in condensed consolidated stockholders’ equity.
Gains and
losses resulting from foreign currency transactions are included in determining
net income or loss. For the nine months ended September 30, 2009, a foreign
currency transaction gain of $33,000 is included as an offset to selling,
general and administrative expenses in the condensed consolidated statement of
operations.
NOTE
X – Rights Agreement
In July
of 2009, the Company amended its Amended and Restated Certificate of
Incorporation in order to create a new series of preferred stock, to be
designated the “Series A Junior Participating Preferred Stock” (hereafter
referred to as “Preferred Stock”). Shareholders of the
Preferred Stock will be entitled to certain minimum quarterly dividend
rights, voting rights, and liquidation preferences. Because of the nature
of the Series A Preferred Stock’s dividend, liquidation and voting rights, the
value of a share of Preferred Stock is expected to approximate the value of one
share of the Company’s common stock.
In July
of 2009, the Company also adopted a shareholder rights plan (the “Rights Plan”),
which entitles the holders of the rights to purchase from the Company
1/1,000
th
(subject to prospective anti-dilution adjustments) of a share of Preferred Stock
of the Company at a purchase price of $19.47 (a “Right”). The Rights Plan
has a three-year term with the possibility of two separate three-year
renewals. Until a Right is exercised or exchanged in accordance with the
provisions of the rights agreement governing the Rights Plan, the
holder thereof, as such, will have no rights as a stockholder of the Company,
including, without limitation, the right to vote for the election of directors
or upon any matter submitted to stockholders of the Company or to receive
dividends or subscription rights. The Rights were registered with the
Securities and Exchange Commission in July of 2009.
On June
29, 2009, the Board of Directors of the Company declared a dividend of one Right
for each outstanding share of common stock. The dividend was paid on
July 13, 2009 to the stockholders of record on that date.
NOTE
Y – Severance Agreements
In
September 2009, the Company entered into severance agreements with four of its
executive officers. The severance agreements, each of which is substantially
identical in form, provide each executive with certain severance and change in
control benefits upon the occurrence of a “Trigger Event,” as
defined. As a condition to the Company’s obligations under the
severance agreements, each executive has executed and delivered to the Company a
restrictive covenants agreement.
Under the
terms of the severance agreements, each executive is entitled to the
following: (i) a cash payment at the rate of the executive’s annual
base salary as in effect immediately prior to the Trigger Event for a period of
12 to 18 months, (ii) partial accelerated vesting of the executive’s previously
granted stock options and restricted stock awards, and (iii) an award of
“Performance Shares” under the Restricted Stock Unit Award Agreement previously
entered into between the Company and the executive.
NOTE
Z – Recent Accounting Pronouncements
In May
2009, the FASB issued ASC 855 (formerly Statement of Financial Accounting
Standards (SFAS) No. 165), “Subsequent Events” (“ASC 855”). ASC 855
establishes general standards of accounting for and disclosure of events that
occur after the balance sheet date but before financial statements are issued or
are available to be issued. ASC 855 sets forth (1) the period after the balance
sheet date during which management of a reporting entity should evaluate events
or transactions that may occur for potential recognition or disclosure in the
financial statements, (2) the circumstances under which an entity should
recognize events or transactions occurring after the balance sheet date in its
financial statements and (3) the disclosures that an entity should make about
events or transactions that occurred after the balance sheet date. ASC 855 is
effective for interim or annual financial periods ending after June 15, 2009.
The Company has evaluated subsequent events through November 6, 2009, which is
the date that these financial statements were filed with the Securities and
Exchange Commission.
In June
2009, the FASB issued ASC topic 105,
“Generally Accepted
Accounting Principles” (formerly SFAS No. 168) (“ASC 105”)
.
ASC 105 establishes as the
sole source of authoritative generally accepted accounting
principles. Pursuant to the provisions of ASC 105, the Company has
updated references to GAAP in its financial statements for the period ended
September 30, 2009. This pronouncement is effective September 15, 2009. The
adoption of this pronouncement did not have an effect on the Company’s condensed
consolidated financial statements.
In June
2009, the FASB issued SFAS No. 166, “Accounting for Transfers of Financial
Assets—an amendment of FASB Statement No. 140” (“SFAS 166”). SFAS 166 improves
the relevance, representational faithfulness, and comparability of the
information that a reporting entity provides in its financial statements about a
transfer of financial assets; the effects of a transfer on its financial
position, financial performance, and cash flows; and a transferor’s continuing
involvement, if any, in transferred financial assets. SFAS 166 is effective as
of the beginning of each reporting entity’s first annual reporting period that
begins after November 15, 2009, for interim periods within that first annual
reporting period and for interim and annual reporting periods thereafter. The
Company is evaluating the impact the adoption of SFAS 166 will have on its
consolidated financial statements.
In
June 2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No.
46(R)” (“SFAS 167”). SFAS 167 improves financial reporting by enterprises
involved with variable interest entities and addresses (1) the effects on
certain provisions of FASB Interpretation No. 46 (revised December 2003),
“Consolidation of Variable Interest Entities,” as a result of the elimination of
the qualifying special-purpose entity concept in SFAS 166, and (2) constituent
concerns about the application of certain key provisions of Interpretation
46(R), including those in which the accounting and disclosures under the
Interpretation do not always provide timely and useful information about an
enterprise’s involvement in a variable interest entity. SFAS 167 is effective as
of the beginning of each reporting entity’s first annual reporting period that
begins after November 15, 2009, for interim periods within that first annual
reporting period, and for interim and annual reporting periods thereafter. The
Company is evaluating the impact the adoption of SFAS 167 and anticipates that
it will not have an impact on the Company’s condensed consolidated financial
position or results of operations.
In August
2009, the FASB issued Accounting Standards Update (ASU) No. 2009-05,
“Measuring Liabilities at Fair Value.” This ASU clarifies the application of
certain valuation techniques in circumstances in which a quoted price in an
active market for the identical liability is not available and clarifies that
when estimating the fair value of a liability, the fair value is not adjusted to
reflect the impact of contractual restrictions that prevent its transfer. The
guidance provided in this ASU becomes effective on October 1, 2009. The
Company is currently evaluating the impact the adoption of this ASU will have on
its condensed consolidated financial statements.
In
September 2009, the FASB issued ASU No. 2009-12, “Investments in Certain
Entities That Calculate Net Asset Value per Share (or Its Equivalent).” This ASU
provides amendments for the fair value measurement of investments to create a
practical expedient to measure the fair value of an investment in certain
entities on the basis of the net asset value per share of the investment (or its
equivalent) determined as of the reporting entity’s measurement date. Therefore,
certain attributes of the investment (such as restrictions on redemption) and
transaction prices from principal-to-principal or brokered transactions will not
be considered in measuring the fair value of the investment if the practical
expedient is used. The amendment in this ASU also requires disclosures by major
category of investment about the attributes of those investments, such as the
nature of any restrictions on the investor’s ability to redeem its investments
at the measurement date, any unfunded commitments, and the investment strategies
of the investees. The amendments in this ASU are effective for interim and
annual periods ending after December 15, 2009. Early application is
permitted. The Company is currently evaluating this new ASU and anticipates that
it will not have an impact on the Company’s condensed consolidated financial
position or results of operations.
In
October 2009, the FASB issued ASU No. 2009-13, “Multiple-Deliverable
Revenue Arrangements.” This ASU establishes the accounting and reporting
guidance for arrangements including multiple revenue-generating activities. This
ASU provides amendments to the criteria for separating deliverables, measuring
and allocating arrangement consideration to one or more units of accounting. The
amendments in this ASU also establish a selling price hierarchy for determining
the selling price of a deliverable. Significantly enhanced disclosures are also
required to provide information about a vendor’s multiple-deliverable revenue
arrangements, including information about the nature and terms, significant
deliverables, and its performance within arrangements. The amendments also
require providing information about the significant judgments made and changes
to those judgments and about how the application of the relative selling-price
method affects the timing or amount of revenue recognition. The amendments in
this ASU are effective prospectively for revenue arrangements entered into or
materially modified in fiscal years beginning on or after June 15, 2010.
Early application is permitted. The Company is currently evaluating the impact
the adoption of this ASU will have on its condensed consolidated financial
statements.
In
October 2009, the FASB issued ASU No. 2009-14, “Certain Revenue
Arrangements That Include Software Elements.” This ASU changes the accounting
model for revenue arrangements that include both tangible products and software
elements that are “essential to the functionality”, and scopes these products
out of current software revenue guidance. The new guidance will include factors
to help companies determine what software elements are considered “essential to
the functionality.” The amendments will now subject software-enabled products to
other revenue guidance and disclosure requirements, such as guidance surrounding
revenue arrangements with multiple deliverables. The amendments in this ASU are
effective prospectively for revenue arrangements entered into or materially
modified in the fiscal years beginning on or after June 15, 2010. Early
application is permitted. The Company is currently evaluating the impact the
adoption of this ASU will have on its consolidated financial
statements.
NOTE
AA – Subsequent Events
The
Company has evaluated subsequent events through November 6, 2009 which is the
date these financial statements were filed with the Securities and Exchange
Commission.
Acquisition
On
October 19, 2009, the Company acquired Didbox Ltd. (“Didbox”), a
privately-held manufacturer and marketer of vehicle operator identification
systems based in the United Kingdom. The all-cash transaction valued at
approximately $660,000 was structured with $533,000 paid up front and the
balance due in 12 months based upon achievement of certain revenue and operating
profit targets. The Didbox business compliments the Company’s existing
businesses. In addition, the acquisition is expected to provide the
Company with access to a broader base of customers in Europe.
Item
2. Management's Discussion and Analysis of Consolidated Financial
Condition and Consolidated Results of Operations
The
following discussion and analysis of the consolidated financial condition and
results of operations of I.D. Systems, Inc. (the “Company,” “we” or “us”)
should be read in conjunction with the consolidated financial statements and
notes thereto appearing elsewhere herein.
This
report contains various forward-looking statements made pursuant to the safe
harbor provisions under the Private Securities Litigation Reform Act of 1995 and
information that is based on management’s beliefs as well as assumptions made by
and information currently available to management. Although the
Company believes that the expectations reflected in such forward-looking
statements are reasonable, the Company can give no assurance that such
expectations will prove to be correct. When used in this report, the
words “anticipate”, “believe”, “estimate”, “expect”, “predict”, “project”, and
similar expressions or words, or the negatives of those words, are intended to
identify forward-looking statements. Readers are cautioned not to place undue
reliance on forward-looking statements, which speak only as of the date hereof,
and should be aware that the Company’s actual results could differ materially
from those described in the forward-looking statements due to a number of
factors, including business conditions and growth in the wireless tracking
industries, general economic conditions, lower than expected customer orders or
variations in customer order patterns, competitive factors including increased
competition, changes in product and service mix, and resource constraints
encountered in developing new products and other factors described under “Risk
Factors” set forth in the Company’s Annual Report on Form 10-K for the fiscal
year ended December 31, 2008 and other filings with the Securities and Exchange
Commission (the “SEC”). Any forward-looking statements regarding
industry trends, product development and liquidity and future business
activities should be considered in light of these factors. The
Company undertakes no obligation, and expressly disclaims any obligation, to
publicly release the results on any revisions to these forward-looking
statements that may be made to reflect events or circumstances after the date
hereof or to reflect the occurrence of unanticipated events, or
otherwise.
The
Company makes available through its internet website free of charge its Annual
Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form
8-K, and amendments to such reports and other filings made by the Company with
the SEC, as soon as practicable after the Company electronically files such
reports and filings with the SEC. The Company’s website address is
www.id-systems.com. The information contained in this website is not
incorporated by reference in this report.
In the
following discussions, most percentages and dollar amounts have been rounded to
aid presentation, and accordingly, all amounts are approximations.
Overview
We
develop, market and sell wireless solutions for managing and securing high-value
enterprise assets. These assets include industrial vehicles, such as forklifts
and airport ground support equipment, and rental vehicles. Our patented Wireless
Asset Net system, which utilizes RFID technology, addresses the needs of
organizations to control, track, monitor and analyze their assets. Our solutions
enable our customers to achieve tangible economic benefits by making timely,
informed decisions that increase the security, productivity and efficiency of
their operations.
We have
focused our business activities on two primary applications - industrial fleet
management and security, and rental fleet management. Our solution for
industrial fleet management and security allows our customers to reduce
operating costs and capital expenditures and to comply with certain safety
regulations by accurately and reliably measuring and controlling fleet activity.
This solution also enhances security at industrial facilities and areas of
critical infrastructure, such as airports, by controlling access to, and
restricting the use of, vehicles and equipment. Our solution for rental fleet
management allows rental car companies to generate higher revenue by more
accurately tracking vehicle data, such as fuel consumption and odometer
readings, and improve customer service by expediting the rental and return
processes. In addition to focusing on these core applications, we have adapted,
and intend to continue to adapt, our solutions to meet our customers’ broader
asset management needs.
We sell
our system to both executive and division-level management. Typically, our
initial system deployment serves as a basis for potential expansion across the
customer’s organization. We work closely with customers to help
maximize the utilization and benefits of our system and demonstrate the value of
enterprise-wide deployments.
We market
and sell our solutions to a wide range of customers in the commercial and
government sectors. Our customers operate in diverse markets, such as automotive
manufacturing, heavy industry, retail and wholesale distribution, aerospace and
defense, homeland security and vehicle rental.
During
the nine months ended September 30, 2009, we generated revenues of $7.5 million,
and the U.S. Postal Service, Wal-Mart Stores, Inc. and Ford Motor Company Inc.
accounted for 27%, 19% and 12 % of our revenues, respectively. During the nine
months ended September 30, 2008, we generated revenues of $ 19.1 million, and
the U.S. Postal Service accounted for 50% of our revenues.
We are
highly dependent upon sales of our system to a few customers. The loss of any of
these key customers, or any material reduction in the amount of our products
they purchase during a particular period, could materially and adversely affect
our revenues for such period. Conversely, a material increase in the
amount of our products purchased by a key customer (or customers) during a
particular period could result in a significant increase in our revenues for
such period, and such increased revenues may not recur in subsequent
periods. Some of these key customers, as well as other customers of
the Company, operate in markets that have suffered business downturns in the
past few years or may so suffer in the future, particularly in light of the
current global economic downturn, and any material adverse change in the
financial condition of such customers could materially and adversely affect our
financial condition and results of operations. If we are unable to replace such
revenue from existing or new customers, the market price of our common stock
could decline significantly.
We expect
that customers who utilize our solutions will do so as part of a large-scale
deployment of these solutions across multiple or all divisions of their
organizations. A customer’s decision to deploy our solutions throughout its
organization will involve a significant commitment of its resources.
Accordingly, initial implementations may precede any decision to deploy our
solutions enterprise-wide. Throughout this sales cycle, we may spend
considerable time and expense educating and providing information to prospective
customers about the benefits of our solutions.
The
timing of the deployment of our solutions may vary widely and will depend on the
specific deployment plan of each customer, the complexity of the customer’s
organization and the difficulty of such deployment. Customers with substantial
or complex organizations may deploy our solutions in large increments on a
periodic basis. Accordingly, we may receive purchase orders for significant
dollar amounts on an irregular and unpredictable basis. Because of our limited
operating history and the nature of our business, we cannot predict the timing
or size of these sales and deployment cycles. Long sales cycles, as well as our
expectation that customers will tend to place large orders sporadically with
short lead times, may cause our revenues and results of operations to vary
significantly and unexpectedly from quarter to quarter.
Our
ability to increase our revenues and generate net income will depend on a number
of factors, including, for example, our ability to:
|
·
|
increase
sales of products and services to our existing
customers;
|
|
·
|
convert
our initial programs into larger or enterprise-wide purchases by our
customers;
|
|
·
|
increase
market acceptance and penetration of our products;
and
|
|
·
|
develop
and commercialize new products and
technologies.
|
Critical
Accounting Policies
For the
nine months ended September 30, 2009, there were no significant changes to the
Company’s critical accounting policies as identified in its Annual Report on
Form 10-K for the year ended December 31, 2008.
Results
of Operations
The
following table sets forth, for the periods indicated, certain operating
information expressed as a percentage of revenue:
|
|
Three months ended
September 30,
|
|
|
Nine months ended
September 30,
|
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
Products
|
|
|
78.8
|
%
|
|
|
66.2
|
%
|
|
|
73.6
|
%
|
|
|
58.5
|
%
|
Services
|
|
|
21.2
|
|
|
|
33.8
|
|
|
|
26.4
|
|
|
|
41.5
|
|
|
|
|
100.0
|
|
|
|
100.0
|
|
|
|
100.0
|
|
|
|
100.0
|
|
Cost
of revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of products
|
|
|
38.8
|
|
|
|
32.8
|
|
|
|
35.7
|
|
|
|
30.7
|
|
Cost
of services
|
|
|
10.2
|
|
|
|
18.4
|
|
|
|
13.3
|
|
|
|
16.2
|
|
|
|
|
49.0
|
|
|
|
51.2
|
|
|
|
49
|
|
|
|
46.9
|
|
Gross
profit
|
|
|
51.1
|
|
|
|
48.8
|
|
|
|
50.9
|
|
|
|
53.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative expenses
|
|
|
41.9
|
|
|
|
197.9
|
|
|
|
65.1
|
|
|
|
155.8
|
|
Research
and development expenses
|
|
|
7.2
|
|
|
|
34.9
|
|
|
|
10.9
|
|
|
|
27.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from operations
|
|
|
2.0
|
|
|
|
(184.0
|
)
|
|
|
(25.1
|
)
|
|
|
(129.8
|
)
|
Interest
income, net
|
|
|
4.6
|
|
|
|
15.4
|
|
|
|
9.7
|
|
|
|
12.2
|
|
Interest
expense
|
|
|
—
|
|
|
|
(2.4
|
)
|
|
|
|
|
|
|
(1.2
|
)
|
Other
income
|
|
|
—
|
|
|
|
6.0
|
|
|
|
—
|
|
|
|
5.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income (loss)
|
|
|
6.6
|
%
|
|
|
(165.0
|
)%
|
|
|
(15.4
|
)%
|
|
|
(113.0
|
)%
|
Three
Months Ended September 30, 2009 Compared to Three Months Ended September 30,
2008
REVENUES.
Revenues decreased
by $7.5 million, or 80.3%, to $1.8 million in the three months ended September
30, 2009.
Revenues
from products decreased by $6.1 million, or 83.5%, to $1.2 million in the three
months ended September 30, 2009 from $7.4 million in the same period in 2008.
Overall, the decrease in revenues was attributable to a decrease in the number
of large orders received. The decrease in product orders was primarily accounted
for in reduced revenue of $6.6 million from Wal-Mart Stores, Inc.
Revenues
from services decreased by $1.3 million, or 68.5%, to $623,000 in the three
months ended September 30, 2009 from $2.0 million in the same period in 2008.
The decrease in service revenue is primarily attributable to a decrease in the
amount of services rendered to the United States Postal Service in the amount of
$1.7 million during the three months ended September 30, 2009, partially offset
by increased maintenance revenue from other customers.
COST OF REVENUES.
Cost of
revenues decreased by $3.6 million, or 79.4%, to $942,000 in the three months
ended September 30, 2009 from $4.6 million for the same period in 2008. The
decrease is attributable to the decrease in revenue in 2009. Gross profit was
$899,000 in 2009 compared to $4.7 million in 2008. As a percentage of revenues,
gross profit decreased to 48.8% in 2009 from 51.1% in 2008
.
Cost of
products decreased by $3.0 million, or 83.4%, to $603,000 in the three months
ended September 30, 2009 from $3.6 million in the same period in 2008. Gross
profit for products was $615,000 in 2009 compared to $3.7 million in 2008. As a
percentage of product revenues, gross profit of 50.5% in 2009 was consistent
with the gross profit of 50.8% in 2008.
Cost of
services decreased by $609,000, or 64.2%, to $339,000 in the three months ended
September 30, 2009 from $948,000 in the same period in 2008. Gross profit for
services was $284,000 in 2009 compared to $1.0 million in 2008. As a percentage
of service revenues, gross profit decreased to 45.6% in 2009 from 52.1% in
2008. The gross margin decrease was primarily due to a reduction in
service revenue with fixed costs remaining constant, driving the margin
down.
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES.
Selling, general and administrative expenses decreased by
$266,000, or 6.8%, to $3.6 million in the three months ended September 30, 2009
compared to $3.9 million in the same period in 2008. This decrease was primarily
attributable to decreases in non-payroll selling expenses, recruiting
costs, commissions and stock-based compensation partially offset by increases in
professional fees. As a percentage of revenues, selling, general and
administrative expenses increased to 197.9% in the three months ended September
30, 2009 from 41.9% in the same period in 2008 primarily due to the decrease in
revenue in the three months ended September 30, 2009.
RESEARCH AND DEVELOPMENT
EXPENSES.
Research and development expenses decreased by $30,000, or
4.5%, to $642,000 in the three months ended September 30, 2009 from $672,000 in
the same period in 2008. As a percentage of revenues, research and development
expenses increased to 34.9% in the three months ended September 30, 2009 from
7.2% in the same period in 2008 due primarily to a decrease in revenue in the
three months ended September 30, 2009, as discussed above.
INTEREST INCOME.
Interest
income decreased by $150,000 to $284,000 in the three months ended September 30,
2009 from $434,000 in the same period in 2008. This decrease was attributable
primarily to the decrease in the rate of interest earned on the Company’s cash
and investments.
INTEREST
EXPENSE
Interest expense increased by $44,000 in the three
months ended September 30, 2009 from $0 in the same period in 2008. This
increase was due to interest expense incurred on the Company’s line of credit
borrowing facility which was not in place during 2008.
OTHER
INCOME.
Other income of $110,000 in the three months ended
September 30, 2009 reflects the change in the fair value of the Company’s
investment in auction rate securities and the auction rate securities
right.
NET LOSS.
Net loss was $3.0
million, or $(0.27) per basic and diluted share, for the three months ended
September 30, 2009 as compared to net income of $619,000, or $0.06 per basic and
diluted share, for the same period in 2008. The difference from net income to
net loss was due primarily to the reasons described above.
Nine
Months Ended September 30, 2009 Compared to Nine Months Ended September 30,
2008
REVENUES.
Revenues decreased
by $11.7 million, or 61.0%, to $7.5 million in the nine months ended September
30, 2009.
Revenues
from products decreased by $9.7 million, or 69.0%, to $4.4 million in the nine
months ended September 30, 2009 from $14.1 million in the same period in 2008.
The decrease in revenues was primarily attributable to the decrease in revenue
from the United States Postal Service in the amount of $4.6 million due to a
spending freeze and from Wal-Mart Stores, Inc. in the amount of $5.9 million,
partially offset by increases in revenue from other customers.
Revenues
from services decreased by $1.9 million, or 38.6%, to $3.0 million in the nine
months ended September 30, 2009 from $5.0 million in the same period in 2008.
The decrease in service revenue is primarily attributable to a decrease in the
amount of services rendered to the United States Postal Service in the amount of
$2.9 million during the nine months ended September 30, 2009, partially offset
by increased maintenance revenue from other customers.
COST OF REVENUES.
Cost of
revenues decreased by $5.9 million, or 62.7%, to $3.5 million in the nine months
ended September 30, 2009. The decrease was attributable to the decrease in
revenue in 2009. Gross profit was $4.0 million in 2009 compared to $9.7 million
in 2008. As a percentage of revenues, gross profit increased to 53.1% in 2009
from 51.0% in 2008
.
Cost of
products decreased by $4.5 million, or 66.5%, to $2.3 million in the nine months
ended September 30, 2009 from $6.8 million in the same period in 2008. Gross
profit for products was $2.1 million in 2009 compared to $7.2 million in 2008.
As a percentage of product revenues, gross profit decreased to 47.5% in 2009
from 51.5% in 2008. The decrease in gross profit was due to lower revenue in
2009 resulting in fixed expenses having a greater negative impact on the gross
profit percentage in 2009.
Cost of
services decreased by $1.3 million, or 52.5%, to $1.2 million in the nine months
ended September 30, 2009 from $2.5 million in the same period in 2008. Gross
profit for services was $1.9 million in 2009 compared to $2.5 million in 2008.
As a percentage of service revenues, gross profit increased to 60.1% in 2009
from 49.5% in 2008. The gross margin increase was due to a mix in service
revenue. During the nine months ended September 30, 2008, a higher percentage of
our service revenue was for vehicle and infrastructure installations for the
United States Postal Service. Those services are performed by subcontractors and
have lower gross margins than training and support services performed by our own
field staff. Maintenance revenue, which has higher margins, also increased by
$400,000, or 73%, in the nine months ended September 30, 2009 compared to
September 30, 2008.
S
ELLING, GENERAL AND ADMINISTRATIVE
EXPENSES.
Selling, general and administrative expenses decreased
$830,000, or 6.7%, to $11.6 million in the nine months ended September 30, 2009
compared to $12.4 million in the same period in 2008. This decrease was
primarily attributable to decreases in non-payroll selling expenses, recruiting
costs, commissions and stock-based compensation partially offset by increases in
professional fees. As a percentage of revenues, selling, general and
administrative expenses increased to 155.8% in the nine months ended September
30, 2009 from 65.1% in the same period in 2008 due to a decrease in
revenue.
RESEARCH AND DEVELOPMENT
EXPENSES.
Research and development expenses decreased $69,000, or 3.3%,
to $2.0 million in the nine months ended September 30, 2009 from $2.1 million in
the same period in 2008. As a percentage of revenues, research and development
expenses increased to 27.1% in the nine months ended September 30, 2009 from
10.9% in the same period in 2008 due primarily to a decrease in revenue in the
nine months ended September 30, 2009, as discussed above.
INTEREST INCOME.
Interest
income decreased $940,000 to $913,000 in the nine months ended September 30,
2009 from $1.9 million in the same period in 2008. This decrease was
attributable primarily to the decrease in interest rates earned on the Company’s
investments.
INTEREST
EXPENSE
Interest expense increased by $87,000 in the nine
months ended September 30, 2009 from $0 in the same period in 2008. This
increase was due to interest expense incurred on the Company’s line of credit
borrowing facility which was not in place during 2008.
OTHER INCOME.
Other income of
$422,000 in the nine months ended September 30, 2009 reflects the change in the
fair value of the Company’s investment in auction rate securities and the
auction rate securities right.
NET LOSS.
Net loss was $8.4
million, or $(0.77) per basic and diluted share, for the nine months ended
September 30, 2009 as compared to net loss of $2.9 million, or $(0.27) per basic
and diluted share, for the same period in 2008. The increase in net loss was due
primarily to the reasons described above.
Liquidity
and Capital Resources
Historically,
except for our line of credit borrowing of $12.9 million in the first quarter of
2009, the Company’s capital requirements have been funded primarily from the net
proceeds from the sale of its securities, including the sale of its common stock
upon the exercise of options and warrants. As of September 30, 2009, the Company
had cash and marketable securities of $64.3 million and working capital of $49.4
million compared to $56.0 million and $30.9 million, respectively, as of
December 31, 2008.
Operating
Activities
Net cash
used in operating activities was $4.4 million for the nine months ended
September 30, 2009, compared to net cash used in operating activities of $5.8
million for the same period in 2008. The net cash used in operating activities
for the nine months ended September 30, 2009 reflects a net loss of $8.4 million
and includes non-cash charges of $1.6 million for stock-based compensation and
$0.4 million for depreciation and amortization expense. Changes in
working capital items included:
|
·
|
a
decrease in accounts receivable of $6.3 million resulting from increased
cash collections and the overall decrease in
revenue;
|
|
·
|
a
increase in inventory of $2.3 million;
and
|
|
·
|
a
decrease in accounts payable and accrued expenses of $1.6 million
primarily due to the timing of the payments to our
vendors.
|
Investing
Activities
Net cash
used by investing activities was $6.3 million for the nine months ended
September 30, 2009, compared to net cash provided by investing activities of
$10.1 million for the same period in 2008. The change was due primarily to an
increase in the purchase of investments which was partially offset by an
increase in maturities of investments.
Financing
Activities
Net cash
provided by financing activities was $12.6 million for the nine months ended
September 30, 2009, compared to net cash used in financing activities of $2.7
million for the same period in 2008. The increase was due to the borrowing of
$12.9 million from the UBS line of credit facility.
Capital
Requirements
The
Company believes that with the cash it has on hand it will have sufficient funds
available to cover its working capital requirements.
The
Company’s working capital requirements depend on a variety of factors,
including, but not limited to, the length of the sales cycle, the rate of
increase or decrease in its existing business base, the success, timing, and
amount of investment required to bring new products to market, revenue growth or
decline and potential acquisitions. Failure to generate positive cash flow from
operations will have a material adverse effect on the Company’s business,
financial condition and results of operations. The Company may determine in the
future that it requires additional funds to meet its long-term strategic
objectives, including completion of potential acquisitions. Any additional
equity financing may be dilutive to stockholders, and debt financing, if
available, may involve significant restrictive covenants, and the Company cannot
make any assurances that such financing will be available on terms acceptable to
it or at all.
At
September 30, 2009, the Company held approximately $20.4 million par value
in auction rate securities (“ARS”) ($20.5 million fair value including
the ARSR described below, which was valued at $1.8 million at September 30,
2009). These ARS represent interests in collateralized pools of student
loan receivables issued by agencies established by counties, cities, states
and other municipal entities within the United States. Liquidity for these
ARS is typically provided by an auction process that resets the applicable
interest rate at pre-determined intervals. In February 2008 and
continuing in 2009, these securities failed to sell at auction. These failed
auctions represent liquidity risk exposure and are not defaults or credit
events. As holder of the securities, the Company continues to
receive interest on the ARS.
The
Company purchased all of the ARS it holds from UBS. In October 2008, the Company
received an offer (the “Offer”) from UBS for a put right (the “ARSR”)
permitting the Company to sell all of its ARS to UBS at a future
date (any time during a two-year period beginning June 30, 2010). The
Offer also included a commitment to loan the Company 75% of the
UBS-determined value of the ARS at any time until the put is exercised at a
variable interest rate that will equal the lesser of: (i) the applicable
reference rate plus a spread set forth in the applicable credit agreement and
(ii) the then-applicable weighted average interest or dividend rate paid to the
Company by the issuer of the ARS that is pledged to UBS as
collateral. In November 2008, the Company accepted the
Offer. In exchange for the Offer, the Company provided UBS with a general
release of claims (other than certain consequential damages claims) concerning
the Company’s ARS and granted UBS the right to purchase the Company's ARS at any
time for full par value.
In March
2009, the Company borrowed $12,900,000 (which amount was equal to 75% of the
UBS-determined value of the ARS) against the UBS line of credit facility.
Principal payments reduced this obligation to $12,643,000 at September 30, 2009.
This line of credit facility is payable on demand. The Company is paying
interest on this obligation based upon the methodology described above, which is
partially offset interest earned on the underlying ARS.
Given the
substantial dislocation in the financial markets and among financial services
companies, there can be no assurance that UBS ultimately will have the ability
to repurchase the Company's ARS at par, or at any other price, as these rights
will be an unsecured contractual obligation of UBS, or that if UBS determines to
purchase the Company's ARS at any time, the Company will be able to reinvest the
cash proceeds of any such sale at the same interest rate or dividend yield
currently being paid to the Company under the ARS. Also, as a
condition of accepting the ARSR, the Company was required to sign a release of
claims against UBS, which will prevent the Company from making claims against
UBS related to the Company's investment in ARS, other than claims for
consequential damages.
Off-Balance
Sheet Arrangements
We do not
have any off-balance sheet arrangements that have or are reasonably likely to
have a current or future effect on our financial condition, revenues or
expenses, results of operations, liquidity, capital expenditures or capital
resources.
Contractual
Obligations
As of
September 30, 2009, there have been no material charges in contractual
obligations as disclosed under the caption “Contractual Obligations” in Item 7
of our Annual Report on Form 10-K for the fiscal year ended December 31,
2008.
Inflation
Inflation
has not had, nor is it expected to have, a material impact on our consolidated
financial results.
Impact
of Recently Issued Accounting Pronouncements
In May
2009, the FASB issued ASC 855 (formerly Statement of Financial Accounting
Standards (SFAS) No. 165), “Subsequent Events” (“ASC 855”). ASC 855
establishes general standards of accounting for and disclosure of events that
occur after the balance sheet date but before financial statements are issued or
are available to be issued. ASC 855 sets forth (1) the period after the balance
sheet date during which management of a reporting entity should evaluate events
or transactions that may occur for potential recognition or disclosure in the
financial statements, (2) the circumstances under which an entity should
recognize events or transactions occurring after the balance sheet date in its
financial statements and (3) the disclosures that an entity should make about
events or transactions that occurred after the balance sheet date. ASC 855 is
effective for interim or annual financial periods ending after June 15, 2009.
The Company has evaluated subsequent events through November 6, 2009, which is
the date that these financial statements were filed with the Securities and
Exchange Commission.
In June
2009, the FASB issued ASC topic 105,
“Generally Accepted
Accounting Principles” (formerly SFAS No. 168) (“ASC 105”)
.
ASC 105 establishes as the
sole source of authoritative generally accepted accounting
principles. Pursuant to the provisions of ASC 105, the Company has
updated references to GAAP in its financial statements for the period ended
September 30, 2009. This pronouncement is effective September 15, 2009. The
adoption of this pronouncement did not have an effect on the Company’s condensed
consolidated financial statements.
In June
2009, the FASB issued SFAS No. 166, “Accounting for Transfers of Financial
Assets—an amendment of FASB Statement No. 140” (“SFAS 166”). SFAS 166 improves
the relevance, representational faithfulness, and comparability of the
information that a reporting entity provides in its financial statements about a
transfer of financial assets; the effects of a transfer on its financial
position, financial performance, and cash flows; and a transferor’s continuing
involvement, if any, in transferred financial assets. SFAS 166 is effective as
of the beginning of each reporting entity’s first annual reporting period that
begins after November 15, 2009, for interim periods within that first annual
reporting period and for interim and annual reporting periods thereafter. The
Company is evaluating the impact the adoption of SFAS 166 will have on its
condensed consolidated financial statements.
In June
2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No.
46(R)” (“SFAS 167”). SFAS 167 improves financial reporting by enterprises
involved with variable interest entities and addresses (1) the effects on
certain provisions of FASB Interpretation No. 46 (revised December 2003),
“Consolidation of Variable Interest Entities,” as a result of the elimination of
the qualifying special-purpose entity concept in SFAS 166, and (2) constituent
concerns about the application of certain key provisions of Interpretation
46(R), including those in which the accounting and disclosures under the
Interpretation do not always provide timely and useful information about an
enterprise’s involvement in a variable interest entity. SFAS 167 is effective as
of the beginning of each reporting entity’s first annual reporting period that
begins after November 15, 2009, for interim periods within that first annual
reporting period, and for interim and annual reporting periods thereafter. The
Company is evaluating the impact the adoption of SFAS 167 and anticipates that
it will not have an impact on the Company’s condensed consolidated financial
position or results of operations.
In August
2009, the FASB issued Accounting Standards Update (ASU) No. 2009-05,
“Measuring Liabilities at Fair Value.” This ASU clarifies the application of
certain valuation techniques in circumstances in which a quoted price in an
active market for the identical liability is not available and clarifies that
when estimating the fair value of a liability, the fair value is not adjusted to
reflect the impact of contractual restrictions that prevent its transfer. The
guidance provided in this ASU becomes effective on October 1, 2009. The
Company is currently evaluating the impact the adoption of this ASU will have on
its condensed consolidated financial statements.
In
September 2009, the FASB issued ASU No. 2009-12, “Investments in Certain
Entities That Calculate Net Asset Value per Share (or Its Equivalent).” This ASU
provides amendments for the fair value measurement of investments to create a
practical expedient to measure the fair value of an investment in certain
entities on the basis of the net asset value per share of the investment (or its
equivalent) determined as of the reporting entity’s measurement date. Therefore,
certain attributes of the investment (such as restrictions on redemption) and
transaction prices from principal-to-principal or brokered transactions will not
be considered in measuring the fair value of the investment if the practical
expedient is used. The amendment in this ASU also requires disclosures by major
category of investment about the attributes of those investments, such as the
nature of any restrictions on the investor’s ability to redeem its investments
at the measurement date, any unfunded commitments, and the investment strategies
of the investees. The amendments in this ASU are effective for interim and
annual periods ending after December 15, 2009. Early application is
permitted. The Company is currently evaluating this new ASU and anticipates that
it will not have an impact on the Company’s condensed consolidated financial
position or results of operations.
In
October 2009, the FASB issued ASU No. 2009-13, “Multiple-Deliverable
Revenue Arrangements.” This ASU establishes the accounting and reporting
guidance for arrangements including multiple revenue-generating activities. This
ASU provides amendments to the criteria for separating deliverables, measuring
and allocating arrangement consideration to one or more units of accounting. The
amendments in this ASU also establish a selling price hierarchy for determining
the selling price of a deliverable. Significantly enhanced disclosures are also
required to provide information about a vendor’s multiple-deliverable revenue
arrangements, including information about the nature and terms, significant
deliverables, and its performance within arrangements. The amendments also
require providing information about the significant judgments made and changes
to those judgments and about how the application of the relative selling-price
method affects the timing or amount of revenue recognition. The amendments in
this ASU are effective prospectively for revenue arrangements entered into or
materially modified in fiscal years beginning on or after June 15, 2010.
Early application is permitted. The Company is currently evaluating the impact
the adoption of this ASU will have on its condensed consolidated financial
statements.
In
October 2009, the FASB issued ASU No. 2009-14, “Certain Revenue
Arrangements That Include Software Elements.” This ASU changes the accounting
model for revenue arrangements that include both tangible products and software
elements that are “essential to the functionality”, and scopes these products
out of current software revenue guidance. The new guidance will include factors
to help companies determine what software elements are considered “essential to
the functionality.” The amendments will now subject software-enabled products to
other revenue guidance and disclosure requirements, such as guidance surrounding
revenue arrangements with multiple deliverables. The amendments in this ASU are
effective prospectively for revenue arrangements entered into or materially
modified in the fiscal years beginning on or after June 15, 2010. Early
application is permitted. The Company is currently evaluating the impact the
adoption of this ASU will have on its condensed consolidated financial
statements.
Item
3. Quantitative and Qualitative Disclosures About Market
Risk
We are
subject to market risk from changes in interest rates which could affect our
future results of operations and financial condition. We manage our exposure to
these risks through our regular operating and financing activities. As of
September 30, 2009, we had cash, cash equivalents and marketable securities of
$64.3 million.
Our cash
and cash equivalents consist of cash, money market funds, and short-term
investments with original maturities of three months or less. As of September
30, 2009, the carrying value of our cash and cash equivalents approximated
fair value. In a declining interest rate environment, as short-term investments
mature, reinvestment occurs at less favorable market rates, negatively impacting
future investment income. We maintain our cash and cash equivalents with major
financial institutions; however, our cash and cash equivalent balances with
these institutions exceed the Federal Deposit Insurance Corporation (“FDIC”)
insurance limits. While we monitor on a systematic basis the cash and cash
equivalent balances in our operating accounts and adjust the balances as
appropriate, these balances could be impacted if one or more of the financial
institutions with which we deposit fails or is subject to other adverse
conditions in the financial or credit markets. To date, we have experienced no
loss of principal or lack of access to our invested cash or cash equivalents;
however, we can provide no assurance that access to our invested cash and cash
equivalents will not be affected if the financial institutions in which we hold
our cash and cash equivalents fail or the financial and credit markets continue
to worsen.
At
September 30, 2009, the Company held approximately $20.4 million par value in
ARS ($20.5 million fair value including the ARSR, which was valued at $1.8
million at September 30, 2009). These ARS represent interests in collateralized
pools of student loan receivables issued by agencies established by
counties, cities, states and other municipal entities within the United
States. Liquidity for these ARS is typically provided by an auction
process that resets the applicable interest rate at pre-determined
intervals. In February 2008 and continuing in 2009, these securities
failed to sell at auction. These failed auctions represent liquidity risk
exposure and are not defaults or credit events. As holder of the
securities, the Company continues to receive interest on the ARS, and the
securities continue to be auctioned at pre-determined intervals (typically every
28 days) until the auction succeeds, the issuer calls the securities, or they
mature.
The
Company purchased all of the ARS it holds from UBS. In October 2008, the Company
received an offer (the “Offer”) from UBS for a put right (the “ARSR”)
permitting the Company to sell all of its ARS to UBS at par value at a
future date (any time during a two-year period beginning June 30,
2010). The Offer also included a commitment to loan the
Company 75% of the UBS-determined value of the ARS at any time until the
put is exercised at a variable interest rate that will equal the lesser of: (i)
the applicable reference rate plus a spread set forth in the applicable credit
agreement and (ii) the then-applicable weighted average interest or dividend
rate paid to the Company by the issuer of the ARS that is pledged to UBS as
collateral. The Offer was non-transferable and would have expired on November
14, 2008. During November 2008, the Company accepted the
Offer. In exchange for the Offer, the Company provided UBS with a general
release of claims (other than certain consequential damages claims) concerning
the ARS and granted UBS the right to purchase the Company's ARS at any time
for full par value.
Given the
substantial dislocation in the financial markets and among financial services
companies, there can be no assurance that UBS ultimately will have the ability
to repurchase the Company's ARS at par, or at any other price, as these rights
will be an unsecured contractual obligation of UBS, or that if UBS determines to
purchase the Company's ARS at any time, the Company will be able to reinvest the
cash proceeds of any such sale at the same interest rate or dividend yield
currently being paid to the Company. Also, as a condition of
accepting the ARSR, the Company was required to sign a release of claims against
UBS, which will prevent the Company from making claims against UBS related to
the Company's investment in ARS, other than claims for consequential
damages.
Item
4. Controls And Procedures
a.
|
Disclosure
controls and procedures.
|
During
the quarter ended September 30, 2009, our management, including the principal
executive officer and principal financial officer, evaluated our disclosure
controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”)) related to the
recording, processing, summarization and reporting of information in our reports
that we file with the Securities and Exchange Commission. These disclosure
controls and procedures have been designed to ensure that material information
relating to us, including our subsidiaries, is made known to our management,
including these officers, by other of our employees, and that this information
is recorded, processed, summarized, evaluated and reported, as applicable,
within the time periods specified in the Securities and Exchange Commission’s
rules and forms. Due to the inherent limitations of control systems, not all
misstatements may be detected. These inherent limitations include the realities
that judgments in decision-making can be faulty and that breakdowns can occur
because of simple error or mistake. Additionally, controls can be circumvented
by the individual acts of some persons, by collusion of two or more people, or
by management override of the control. Our controls and procedures can only
provide reasonable, not absolute, assurance that the above objectives have been
met.
Based on
their evaluation as of September 30, 2009, our principal executive officer and
principal financial officer have concluded that our disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act)
are effective as of September 30, 2009 to reasonably ensure that the information
required to be disclosed by us in the reports that we file or submit under the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in Securities and Exchange Commission rules and forms and that
information required to be disclosed by us in the reports we file or submit
under the Exchange Act is accumulated and communicated to our management,
including our principal executive and principal financial officers, or persons
performing similar functions, as appropriate to allow timely decisions regarding
required disclosure.
b.
|
Changes
in internal controls over financial
reporting.
|
There
have been no changes in our internal control over financial reporting that
occurred during the nine months ended September 30, 2009 that have materially
affected, or are reasonably likely to materially affect, our internal control
over financial reporting.
PART
II - OTHER INFORMATION
Item
1a. Risk Factors
There
were no material changes in any risk factors previously disclosed in our Annual
Report on Form 10-K for the year ended December 31, 2008 filed with the
Securities and Exchange Commission on March 16, 2009.
Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds
On May 3,
2008, the Company announced that its Board of Directors authorized the
repurchase of issued and outstanding shares of the Company’s common stock having
an aggregate value of up to $10,000,000 pursuant to a share repurchase program
established under Rule 10b-18 of the Securities Exchange Act of 1934, as
amended. The amount and timing of such repurchases are dependent upon
the price and availability of shares, general market conditions and the
availability of cash, as determined in the discretion of our
management. The repurchases are funded from our working
capital. Our share repurchase program does not have an expiration
date, and we may discontinue or suspend the share repurchase program at any
time. All shares of common stock repurchased under our share
repurchase program are held as treasury stock.
The
Company did not purchase any shares of its common stock under the repurchase
program during the quarter ended September 30, 2009.
Item
6. Exhibits
The
following exhibits are filed with this Quarterly Report on Form
10-Q:
Exhibits:
10.1
|
Severance
Agreement, dated September 11, 2009, by and between the Company and
Jeffrey Jagid.
|
10.2
|
Severance
Agreement, dated September 11, 2009, by and between the Company and Ned
Mavrommatis.
|
10.3
|
Severance
Agreement, dated September 11, 2009, by and between the Company and
Kenneth Ehrman.
|
10.4
|
Severance
Agreement, dated September 11, 2009, by and between the Company and
Michael Ehrman.
|
10.5
|
I.D.
Systems, Inc. 2009 Non-Employee Director Equity Compensation
Plan.
|
31.1
|
Certification
of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
|
31.2
|
Certification
of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
|
32
|
Certification
of Chief Executive Officer and Chief Financial Officer Pursuant to Section
906 of the Sarbanes-Oxley Act of
2002.
|
Signatures
In
accordance with the requirements of the Exchange Act, the Registrant has caused
this report to be signed on its behalf by the undersigned thereunto duly
authorized.
|
I.D.
Systems, Inc.
|
|
|
|
|
|
Dated:
November 6, 2009
|
By:
|
/s/ Jeffrey
M. Jagid
|
|
|
|
Jeffrey
M. Jagid
|
|
|
|
Chief
Executive Officer
(Principal
Executive Officer)
|
|
Dated:
November 6, 2009
|
By:
|
/s/ Ned
Mavrommatis
|
|
|
|
Ned
Mavrommatis
|
|
|
|
Chief
Financial Officer
(Principal
Financial Officer)
|
|
INDEX
TO EXHIBITS
Exhibit
Number
|
Description
|
|
|
10.1
|
Severance
Agreement, dated September 11, 2009, by and between I.D. Systems, Inc. and
Jeffrey Jagid.
|
10.2
|
Severance
Agreement, dated September 11, 2009, by and between I.D. Systems, Inc. and
Ned Mavrommatis.
|
10.3
|
Severance
Agreement, dated September 11, 2009, by and between I.D. Systems, Inc. and
Kenneth Ehrman.
|
10.4
|
Severance
Agreement, dated September 11, 2009, by and between I.D. Systems, Inc. and
Michael Ehrman.
|
10.5
|
I.D.
Systems, Inc. 2009 Non-Employee Director Equity Compensation
Plan.
|
31.1
|
Certification
of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
|
31.2
|
Certification
of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
|
32
|
Certification
of Chief Executive Officer and Chief Financial Officer Pursuant to Section
906 of the Sarbanes-Oxley Act of
2002.
|
Exhibit
10.1
SEVERANCE
AGREEMENT
This SEVERANCE AGREEMENT (the “
Agreement
”) is made
this 11
th
day of
September, 2009, by and between I.D. Systems, Inc., a Delaware corporation (the
“
Company
”) and
Jeffrey Jagid (“
Executive
”).
BACKGROUND:
WHEREAS, Executive is currently
employed as Chief Executive Officer
of the Company;
and
WHEREAS, the Board of Directors of the
Company (the "
Board
") has
determined it is in the best interests of the Company to enter into this
Agreement to, among other things, help retain and motivate Executive in his
position with the Company.
NOW, THEREFORE, in consideration of the
foregoing premises and for other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereto hereby agree
as follows:
1.
Certain
Definitions
: As used in the Agreement, the following terms
shall have the respective meanings set forth below:
(a) "
Affiliate
" of the
Company means any Person that controls, is controlled by, or is under common
control with, the Company. A Person shall be deemed to be in control
of another Person if, and for so long as, it owns or controls more than 50% of
the voting power in the election of directors (or, in the case of an entity that
is not a corporation, for the election of the corresponding managing authority)
of such other Person.
(b) “
Cause
” means
Executive’s (i) conviction of, or plea of nolo contendere to, a felony or crime
involving moral turpitude; (ii) fraud on or misappropriation of any funds or
property of the Company; (iii) willful violation of any law, rule or regulation
(other than minor traffic violations or similar offenses or solely as a result
of vicarious liability) or breach of fiduciary duty which results in personal
profit to Executive. Executive shall be given notice of the
termination of Executive's employment for Cause and shall have an opportunity to
be heard by the Board with respect thereto and, to the extent that the Board
deems the matter curable, shall have a reasonable period of time to cure the
matter to the Board's reasonable satisfaction.
(c) “
Change in Control
Event
” means the occurrence of any of the following events with respect
to the Company:
(i) the consummation of any
consolidation or merger of the Company in which the holders of the Company's
common stock, par value $0.01 per share ("
Common Stock
")
immediately prior to such consolidation or merger own less than fifty percent
(50%) of the outstanding common stock of the surviving corporation immediately
after the merger; or
(ii) the
consummation of any sale, lease, exchange or other transfer (in one transaction
or a series of related transactions) of all, or substantially all, of the assets
of the Company, other than to a subsidiary or Affiliate; or
(iii)
any action pursuant to which any person or group (as such terms are
defined in Section 13(d) of the Securities Exchange Act of 1934, as amended (the
"
Exchange
Act
"), shall become the “beneficial owner” (as such term is defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of shares of capital
stock entitled to vote generally for the election of directors of the Company
(“
Voting
Securities
”) representing more than thirty (30%) percent of the combined
voting power of the Company’s then outstanding Voting Securities (calculated as
provided in Rule 13d-3(d) in the case of rights to acquire any such securities);
or
(iv) the
individuals (x) who, as of the effective date of this Agreement, constitute the
Board (the “
Original
Directors
”) and (y) who thereafter are elected to the Board and whose
election, or nomination for election, to the Board was approved by a vote of a
majority of the Original Directors then still in office (such Directors being
called “
Additional
Original Directors
”) and (z) who thereafter are elected to the Board and
whose election or nomination for election to the Board was approved by a vote of
a majority of the Original Directors and Additional Original Directors then
still in office, cease for any reason to constitute a majority of the members of
the Board.
(d) "
Disability
" means
that Executive is incapable of performing his principal duties due to physical
or mental incapacity or impairment for 120 consecutive days, or for 180
non-consecutive days, during any 12 month period.
(e) “
Good Reason
” means
(i) a material reduction in Executive’s base salary as in effect from time to
time; (ii) a material reduction in Executive's authority, duties or
responsibilities; (iii) Executive’s principal office location being moved to a
location which is more than 25 miles from the principal office location at which
Executive performs services on the date this Agreement is executed or (iv) a
material breach by the Company of the agreement under which Executive provides
services to the Company; provided, however, that Executive must notify the
Company, within 90 days of the occurrence of any of the foregoing conditions,
that he considers it to be a "Good Reason" condition, and provide the Company
with at least 30 days in which to cure the condition. In addition,
the resignation may not occur later than 6 months after the occurrence of the
condition giving rise to the resignation. If Executive fails to
provide such notice and cure period prior to his resignation, or his resignation
occurs later than 6 months after the initial occurrence of the condition, his
resignation shall not be deemed to be for "Good Reason" and Executive shall be
deemed to have waived any right to receive any of the payments or benefits set
forth in Section 2 hereof.
(f) “
Person
” means an
individual, a partnership, a limited liability company, a corporation, an
association, a joint stock corporation, a trust, a joint venture, an
unincorporated organization, or any court, administrative agency or commission
or other federal, state, county, local or foreign governmental authority,
instrumentality, agency or commission.
(g) “
Release
” means a
general release agreement in the form annexed hereto as
Exhibit A
and made a
part hereof.
(h) “
Trigger Event
” means
the occurrence of either: (i) the termination of Executive’s employment by the
Company other than a termination for Cause; or (ii) Executive’s resignation for
Good Reason within 6 months following a Change in Control Event. For
purposes of clarity, a termination of Executive's employment due to his death or
Disability shall not be considered a termination of Executive's employment by
the Company other than for Cause, and shall not constitute a Trigger
Event.
2.
Trigger Event Payments and
Benefits
.
Within 45 days after the occurrence of
a Trigger Event (or such shorter period as may be required by the Release),
Executive shall execute and deliver to the Company the Release. Upon
the sooner of the expiration of any applicable revocation period required for
the Release to be effective with respect to age discrimination claims and the
date on which it is otherwise permitted to be effective and irrevocable under
applicable law (such sooner date the “
Release Effective
Date
”), Executive shall be entitled to:
(a) cash
payments (collectively the "
Severance Payment
")
at the rate of Executive’s annual base salary as in effect immediately prior to
the Trigger Event for a period of 18 months (the "
Severance Period
"),
payable as set forth below. The Severance Payment shall be made as a
series of separate payments in accordance with the Company's standard payroll
practices (and subject to all applicable tax withholdings and deductions),
commencing with the first regular payroll date on or immediately following the
60th day after the date of the Trigger Event.
(b) if
Executive timely elects "COBRA" coverage and provided Executive continues to
make contributions for such continuation coverage equal to Executive’s
contribution amount in effect immediately preceding the date of Executive’s
termination of employment, the Company shall waive the remaining portion of
Executive’s healthcare continuation payments under COBRA for the Severance
Period. Notwithstanding the foregoing, in the event that Executive
becomes eligible to obtain alternate healthcare coverage from a new employer
before the end of the Severance Period, the Company’s obligation to waive the
remaining portion of Executive’s healthcare continuation coverage under COBRA
shall cease. Executive understands and affirms that Executive is
obligated to inform the Company if Executive becomes eligible to obtain
alternate healthcare coverage from a new employer before the end of the
Severance Period.
(c) Executive's
previously granted Company stock options and restricted stock ("
Retention Shares
”)
shall (to the extent not already then "vested"), partially "vest" and a portion
of the stock options shall be exercisable, in each case on a pro-rated basis,
taking into account the number of months elapsed since the date of grant as
compared to the scheduled vesting date. For example, if the total
number of months from the grant date until the vesting date is 36 months, and
the Trigger Event occurs at the end of the 12th month after the grant date, then
effective on the Release Effective Date, the total number of vested options and
vested Retention Shares should be equal to 1/3 (
i.e.,
12/36
)
of the total number of each
granted. Notwithstanding anything to the contrary contained herein,
the terms of the I.D. Systems, Inc. 2007 Equity Compensation Plan (the “
Plan
”) shall govern
acceleration of vesting of stock options and restricted stock in the event of a
“Change of Control” as defined in the Plan.
(d) The
“
Performance
Shares
” subject to the Restricted Stock Unit Award Agreement between
Executive and the Company dated as of June 29, 2009 shall be awarded in an
amount and to the extent of the sum of the “Interim Shares” determined (and
defined) in accordance with
Exhibit A
to that
agreement. For example, if a Trigger Event occurs on May 1, 2010, and
the Administrator (as defined in the Plan) has determined that the Stock Price
Target of a stock price of $7.50 has been met with respect to the fiscal year
ended December 31, 2009, then the number of Performance Shares that shall be
awarded upon the Trigger Event (effective on the Release Effective Date) shall
be the number equal to 1/3 of the number of Performance Shares listed in the
table (contained in the Restricted Stock Unit Award Agreement) corresponding to
a stock price of $7.50.
3.
Covenants
Agreement
. As a condition to the Company's obligations
hereunder, Executive shall execute and deliver to the Company an agreement in
the form of
Exhibit
B
annexed hereto and made a part hereof relating to confidentiality,
assignment of inventions, non-competition and non-solicitation. The
non-competition and non-solicitation covenants shall apply for a period equal to
the Severance Period.
4.
At Will
Employment
. Nothing in this Agreement shall alter Executive’s
status as an “at-will” employee.
5.
Headings
. Headings
used in this Agreement are for convenience of reference only and do not affect
the meaning of any provision.
6.
Counterparts
. This
Agreement may be executed as of the same effective date in one or more
counterparts, each of which shall be deemed an original.
7.
Binding Agreement;
Assignment
. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns.
8.
Governing Law;
Jurisdiction
. This Agreement and any and all matters arising
directly or indirectly herefrom shall be governed by, and construed in
accordance with, the internal laws of the State of New Jersey, without reference
to the choice of law principles thereof. Any legal action, suit or
other proceeding arising out of or in any way connected with this Agreement
shall be brought in the courts of the State of New Jersey, or in the United
States courts for the District of New Jersey. With respect to any
such proceeding in any such court: (i) each party generally and unconditionally
submits itself and its property to the exclusive jurisdiction of such court (and
corresponding appellate courts therefrom), and (ii) each party waives, to the
fullest extent permitted by law, any objection it has or hereafter may have the
venue of such proceeding as well as any claim that it has or may have that such
proceeding is in an inconvenient forum.
9.
Amendments
. This
Agreement may only be amended or otherwise modified, and the provisions hereof
may only be waived, by a writing executed by the parties hereto.
10.
Entire
Agreement
. This Agreement shall constitute the entire
agreement of the parties with respect to the matters covered hereby and shall
supersede all previous written, oral or implied understandings between them with
respect to such matters.
11.
Opportunity to Consult
Counsel
. Executive hereby acknowledges that he has read and
fully understands this Agreement, that he has been advised that Lowenstein
Sandler
PC
is counsel to
the Company and not to Executive, and that Executive has been advised to, and
has had the opportunity to, consult with counsel and Executive’s personal
financial or tax advisor with respect to this Agreement.
12.
No Effect on Other
Benefits
. Notwithstanding anything contained herein to the
contrary, nothing contained herein shall adversely affect the rights of
Executive and his dependents and beneficiaries to any and all benefits to which
any of them may be entitled under the benefit plans and arrangements of the
Company in accordance with the terms of such benefit plans and
arrangements.
13.
Section
409A
.
(a) This
Agreement is intended to comply with the requirements of Section 409A of the
Code and regulations promulgated thereunder (“
Section
409A
”). To the extent that any provision in this Agreement is
ambiguous as to its compliance with Section 409A, the provision shall be read in
such a manner so that no payments due under this Agreement shall be subject to
an "additional tax" as defined in Section 409A(a)(1)(B) of the
Code. For purposes of Section 409A, each payment made under this
Agreement shall be treated as a separate payment. In no event may
Executive, directly or indirectly, designate the calendar year of
payment.
(b) Notwithstanding
anything to the contrary contained herein, if necessary to comply with the
restriction in Section 409A(a)(2)(B) of the Code concerning payments to
“specified employees,” any payment on account of Executive’s separation from
service that would otherwise be due hereunder within six months after such
separation shall nonetheless be delayed until the first business day of the
seventh month following Executive’s date of termination and the first such
payment shall include the cumulative amount of any payments that would have been
paid prior to such date if not for such restriction, together with interest on
such cumulative amount during the period of such restriction at a rate, per
annum, equal to the applicable federal short-term rate (compounded monthly) in
effect under Section 1274(d) of the Code on the date of
termination. For purposes of Section 2 hereof, Executive shall be a
“specified employee” for the 12-month period beginning on the first day of the
fourth month following each “Identification Date” if he is a “key employee” (as
defined in Section 416(i) of the Code without regard to Section 416(i)(5)
thereof) of the Company at any time during the 12-month period ending on the
“Identification Date.” For purposes of the foregoing, the
Identification Date shall be December 31. Notwithstanding anything
contained herein to the contrary, Executive shall not be considered to have
terminated employment with the Company for purposes of Section 2 hereof unless
he would be considered to have incurred a “termination of employment” from the
Company within the meaning of Treasury Regulation
§1.409A-1(h)(1)(ii).
(c) Executive
acknowledges that any tax liability incurred by Executive under Section 409A of
the Code is solely the responsibility of Executive.
14.
No
Mitigation
. Executive shall be under no obligation to seek
other employment after Executive's termination of employment with the Company,
and the obligations of the Company to Executive which arise pursuant to Section
2 of this Agreement shall not be subject to mitigation or offset.
IN WITNESS WHEREOF, the parties hereto
have executed this Agreement as of the date first written above.
|
I.D.
SYSTEMS, INC.
|
|
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By:
|
/s/ Ned
Mavrommatis
|
|
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Name: Ned
Mavrommatis
|
|
|
Title: CFO
|
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|
Date: 9/22/09
|
WITNESS:
|
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EXECUTIVE:
|
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|
|
/s/ Michael Ehrman
|
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/s/ Jeffrey Jagid
|
Name: Michael
Ehrman
|
|
Name: Jeffrey
Jagid
|
Date: 9/22/09
|
|
Date: 9-22-09
|
EXHIBIT
A
FORM
OF RELEASE
SEPARATION AND GENERAL
RELEASE AGREEMENT
This Separation and General Release
Agreement (the "
Agreement
") is
entered into between _______________ with an address at
_____________________________ (the “
Employee
") and I.D.
Systems, Inc. ("
ID
Systems
"), together with its parent, divisions, affiliates, and
subsidiaries and their respective officers, directors, employees, shareholders,
members, partners, plan administrators, attorneys, and agents, as well as any
predecessors, future successors or assigns or estates of any of the foregoing
with an address at One University Plaza, 6
th
Floor,
Hackensack, New Jersey 07601 (the “
Released
Parties
”).
1.
Separation of
Employment
. Employee acknowledges and understands that
Employee’s last day of employment with ID Systems was _______________ (the
“
Separation
Date
”). Employee acknowledges and agrees that, except as
otherwise provided in this Agreement, Employee has received all compensation and
benefits to which Employee is entitled as a result of Employee’s
employment. Employee understands that, except as otherwise provided
in this Agreement, Employee is entitled to nothing further from any of the
Released Parties, including reinstatement by ID Systems.
2.
Employee General Release of
Released Parties
. In consideration of the payments and
benefits set forth in Section 4 below, Employee hereby unconditionally and
irrevocably releases, waives, discharges, and gives up, to the full extent
permitted by law, any and all Claims (as defined below) that Employee may have
against any of the Released Parties, arising on or prior to the date of
Employee’s execution and delivery of this Agreement to ID
Systems. “
Claims
” means any and
all actions, charges, controversies, demands, causes of action, suits, rights,
and/or claims whatsoever for debts, sums of money, wages, salary, severance pay,
commissions, bonuses, unvested stock options, vacation pay, sick pay, fees and
costs, attorneys fees, losses, penalties, damages, including damages for pain
and suffering and emotional harm, arising, directly or indirectly, out of any
promise, agreement, offer letter, contract, understanding, common law, tort, the
laws, statutes, and/or regulations of the State of New Jersey or any other state
and the United States, including, but not limited to, federal and state
whistleblower laws, Title VII of the Civil Rights Act of 1964, the Civil Rights
Act of 1991, the Equal Pay Act, the Americans with Disabilities Act, the Family
and Medical Leave Act, the Employment Retirement Income Security Act (excluding
COBRA), the Vietnam Era Veterans Readjustment Assistance Act, the Fair Credit
Reporting Act, the Age Discrimination in Employment Act (“
ADEA
”), the Older
Workers’ Benefit Protection Act, the Occupational Safety and Health Act, the
Sarbanes-Oxley Act of 2002, the New Jersey Law Against Discrimination, the New
Jersey Family Leave Act, the New Jersey Civil Rights Act, and the New Jersey
Conscientious Employee Protection Act, as each may be amended from time to time,
whether arising directly or indirectly from any act or omission, whether
intentional or unintentional. This Section 2 releases all
Claims including those of which Employee is not aware and those not mentioned in
this Agreement. Employee specifically releases any and all Claims
arising out of Employee’s employment with ID Systems or separation
therefrom. Employee expressly acknowledges and agrees that, by
entering into this Agreement, Employee is releasing and waiving any and all
Claims, including, without limitation, Claims that Employee may having arising
under ADEA, which have arisen on or before the date of Employee’s execution and
delivery of this Agreement to ID Systems.
3.
Representations; Covenant
Not to Sue
. Employee hereby represents and warrants to the
Released Parties that Employee has not: (A) filed, caused or permitted to be
filed any pending proceeding (nor has Employee lodged a complaint with any
governmental or quasi-governmental authority) against any of the Released
Parties, nor has Employee agreed to do any of the foregoing; (B) assigned,
transferred, sold, encumbered, pledged, hypothecated, mortgaged, distributed, or
otherwise disposed of or conveyed to any third party any right or Claim against
any of the Released Parties that has been released in this Agreement; or (C)
directly or indirectly assisted any third party in filing, causing or assisting
to be filed, any Claim against any of the Released Parties. Except as
set forth in Section 11 below, Employee covenants and agrees that he shall not
encourage or solicit or voluntarily assist or participate in any way in the
filing, reporting or prosecution by herself or any third party of a proceeding
or Claim against any of the Released Parties.
4.
Payment
. As
good consideration for Employee’s execution, delivery, and non-revocation of
this Agreement, ID Systems shall provide Employee with the payments and benefits
set forth in Section 2 of the Severance Agreement between Employee and ID
Systems dated as of June 29, 2009, payable as set forth
therein. Employee acknowledges that Employee is not otherwise
entitled to receive the payments and benefits described in this Section 4 and
acknowledges that nothing in this Agreement shall be deemed to be an admission
of liability on the part of any of the Released Parties. Employee
agrees that Employee will not seek anything further from any of the Released
Parties.
5.
Who is
Bound
. ID Systems and Employee are bound by this
Agreement. Anyone who succeeds to Employee’s rights and
responsibilities, such as the executors of Employee’s estate, is bound, and
anyone who succeeds to ID Systems’s rights and responsibilities, such as its
successors and assigns, is also bound.
6.
Cooperation.
Employee agrees that, within five business days of the Separation Date, he shall
provide ID Systems (attention: _________) with a written comprehensive summary
of all outstanding work activities, current and prospective customer contact
information, and otherwise reasonably cooperate as necessary to effect a
transition of his responsibilities. Employee also agrees that he will
cease from communicating with any current ID Systems employees (with the
exception of __________________) regarding ID Systems personnel or other
business-related matters. Employee agrees to reasonably cooperate in
any ID Systems investigations and/or litigation regarding events that occurred
during Employee’s tenure with ID Systems. ID Systems will compensate
Employee for reasonable expenses Employee incurs in extending such cooperation
regarding investigations and/or litigation, so long as Employee provides advance
written notice of Employee’s request for compensation.
7.
Non Disparagement and
Confidentiality
. Employee agrees not to make any defamatory or
derogatory statements concerning any of the Released
Parties. Provided inquiries are directed to ID Systems’ Department of
Human Resources, ID Systems shall disclose to prospective employers information
limited to Employee’s dates of employment and last position held by
Employee. Employee confirms and agrees that Employee shall not,
directly or indirectly, disclose to any person or entity or use for Employee’s
own benefit, any confidential information concerning the business, finances or
operations of ID Systems or its customers; provided, however, that Employee’s
obligations under this Section 7 shall not apply to information generally known
in ID Systems’ industry through no fault of Employee or the disclosure of which
is required by law after reasonable notice has been provided to ID Systems
sufficient to enable ID Systems to contest the
disclosure. Confidential information shall include, without
limitation, trade secrets, customer lists, details of contracts, pricing
policies, operational materials, marketing plans or strategies, security and
safety plans and strategies, project development, and any other non-public or
confidential information of, or relating to, ID Systems or its
affiliates. Employee also agrees that the amounts paid to Employee
and all of the other terms of this Agreement shall be kept confidential, unless
ID Systems discloses them in a public filing. Employee acknowledges
that he continues to be bound by the Confidentiality, Assignment of
Contributions and Inventions, Non-Competition and Non-Solicitation Agreement
(the “
Covenants
Agreement
”).
8.
Remedies
. If
Employee tells anyone the amount paid to Employee or any other term of this
Agreement (unless ID Systems has publicly disclosed the terms of this Agreement
in a public filing), breaches any other term or condition of this Agreement or
the Covenants Agreement, or any representation made by Employee in this
Agreement was false when made, it shall constitute a material breach of this
Agreement and, in addition to and not instead of the Released Parties’ other
remedies hereunder, under the Covenants Agreement or otherwise at law or in
equity, Employee shall be required to immediately, upon written notice from ID
Systems, return the payments paid by ID Systems hereunder, less
$500. Employee agrees that if Employee is required to return the
payments, this Agreement shall continue to be binding on Employee and the
Released Parties shall be entitled to enforce the provisions of this Agreement
as if the payments had not been repaid to ID Systems and ID Systems shall have
no further payment obligations to Employee hereunder. Further, in the
event of a material breach of this Agreement, Employee agrees to pay all of the
Released Parties’ attorneys’ fees and other costs associated with enforcing this
Agreement.
9.
ID Systems
Property
. Employee represents that he has returned all ID
Systems property in Employee’s possession, custody or control, including, but
not limited to, all ID Systems equipment, samples, laptop computers, personal
digital assistants, cell phones, pass codes, keys, swipe cards, documents or
other materials that Employee received, prepared, or helped
prepare. Employee represents that Employee has not retained any
copies, duplicates, reproductions, computer disks, or excerpts thereof of ID
Systems’ documents.
10.
Construction of
Agreement
. In the event that one or more of the provisions
contained in this Agreement shall for any reason be held unenforceable in any
respect under the law of any state of the United States or the United States,
such unenforceability shall not affect any other provision of this Agreement,
but this Agreement shall then be construed as if such unenforceable provision or
provisions had never been contained herein or therein. If it is ever
held that any restriction hereunder is too broad to permit enforcement of such
restriction to its fullest extent, such restriction shall be enforced to the
maximum extent permitted by applicable law. This Agreement and any
and all matters arising directly or indirectly herefrom or therefrom shall be
governed under the laws of the State of New Jersey, without reference to choice
of law rules. ID Systems and Employee consent to the sole
jurisdiction of the federal and state courts of New Jersey.
ID SYSTEMS AND EMPLOYEE HEREBY WAIVE
THEIR RESPECTIVE RIGHT TO TRIAL BY JURY IN ANY ACTION CONCERNING THIS AGREEMENT
OR ANY AND ALL MATTERS ARISING DIRECTLY OR INDIRECTLY HEREFROM AND REPRESENT
THAT THEY HAVE CONSULTED WITH COUNSEL OF THEIR CHOICE OR HAVE CHOSEN VOLUNTARILY
NOT TO DO SO SPECIFICALLY WITH RESPECT TO THIS WAIVER.
11.
Acknowledgments
. ID
Systems and Employee acknowledge and agree that:
(A) By entering into this
Agreement, Employee does not waive any rights or Claims that may arise after the
date that Employee executes and delivers this Agreement to ID
Systems;
(B) This
Agreement shall not affect the rights and responsibilities of the Equal
Employment Opportunity Commission (the “
EEOC
”) to enforce the
ADEA and other laws, and further acknowledge and agree that this Agreement shall
not be used to justify interfering with Employee’s protected right to file a
charge or participate in an investigation or proceeding conducted by the
EEOC. Accordingly, nothing in this Agreement shall preclude Employee
from filing a charge with, or participating in any manner in an investigation,
hearing or proceeding conducted by, the EEOC, but Employee hereby waives any and
all rights to recover under, or by virtue of, any such investigation, hearing or
proceeding;
(C) Notwithstanding anything
set forth in this Agreement to the contrary, nothing in this Agreement shall
affect or be used to interfere with Employee’s protected right to test in any
court, under the Older Workers’ Benefit Protection Act, or like statute or
regulation, the validity of the waiver of rights under ADEA set forth in this
Agreement; and
(D) Nothing in this
Agreement shall preclude Employee from: exercising Employee’s rights, if any (i)
under Section 601-608 of the Employee Retirement Income Security Act of 1974, as
amended, popularly known as COBRA, or (ii)
ID Systems’s pension
plan or 401(k) plan, if applicable.
12.
Opportunity For
Review
.
(A) Employee
represents and warrants that Employee: (i) has had sufficient opportunity to
consider this Agreement; (ii) has read this Agreement; (iii) understands all the
terms and conditions hereof; (iv) is not incompetent or had a guardian,
conservator or trustee appointed for Employee; (v) has entered into this
Agreement of Employee’s own free will and volition; (vi) has duly executed and
delivered this Agreement; (vii) understands that Employee is responsible for
Employee’s own attorney’s fees and costs; (viii) has had the opportunity to
review this Agreement with counsel of Employee’s choice or has chosen
voluntarily not to do so; (ix) understands the Employee has been given
twenty-one (21) days to review this Agreement before signing this Agreement and
understands that he is free to use as much or as little of the 21-day period as
he wishes or considers necessary before deciding to sign this Agreement; (x)
understands that if Employee does not sign and return this Agreement to ID
Systems within 21 days of his receipt, ID Systems shall have no obligation to
enter into this Agreement, Employee shall not be entitled to the payments and
benefits set forth in Section 4 of this Agreement, and the Separation Date shall
be unaltered; and (xi) this Agreement is valid, binding and enforceable against
the parties to this Agreement in accordance with its terms.
(B) This
Agreement shall be effective and enforceable on the eighth (8
th
) day
after execution and delivery to ID Systems by Employee. The parties
to this Agreement understand and agree that Employee may revoke this Agreement
after having executed and delivered it to ID Systems by so advising ID Systems
in writing no later than 11:59 p.m. on the seventh (7
th
) day
after Employee’s execution and delivery of this Agreement to ID
Systems. If Employee revokes this Agreement, it shall not be
effective or enforceable, Employee shall not be entitled to the payments and
benefits set forth in Section 4 of this Agreement, and the Separation Date shall
be unaltered.
Agreed to
and accepted on this ____ day of ________, 20__.
Witness:
|
|
EMPLOYEE:
|
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|
|
|
|
Name:
|
|
|
|
Agreed
to and accepted on this ____ day of ________, 20__.
|
|
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|
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ID
SYSTEMS, INC.
|
|
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Name:
|
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Title:
|
EXHIBIT
B
FORM
OF COVENANTS AGREEMENT
I.D.
SYSTEMS, INC.
Confidentiality,
Assignment of Contributions and
Inventions,
Non-Competition, and Non-Solicitation Agreement
Background
. I
am a paid employee of I.D. Systems, Inc., a Delaware corporation (the “
Company
”). I
am executing this Agreement in consideration of my continued
employment with the
Company and the severance agreement effective as of June 29, 2009, the
restricted stock award granted pursuant to the restricted stock award agreement
dated as of June 29, 2009, the restricted stock unit award granted pursuant to
the restricted stock unit award agreement dated as of June 29, 2009 and the
stock option grant pursuant to the stock option grant agreement with a grant
date of June 29, 2009.
1.
Confidentiality
. While
working for the Company, I may have previously developed or acquired, or may in
the future develop or acquire, knowledge in my work or from my colleagues or
otherwise of Confidential Information relating to the Company, its business,
potential business or that of its customers
or its or their
respective affiliates. “
Confidential
Information
” includes information concerning the identity of customers or
their requirements or key contacts within the customer’s organization,
suppliers, distributors, software programs, demonstration programs, routines,
algorithms, computer systems, plans, strategies, research, formulations,
processes, production methods and sources, products and specifications,
equipment manufacturing and other techniques, designs, know-how, show how, trade
secrets, inventions, improvements, discoveries, concepts, methodology, formulas,
drawings, maps, manuals, models, specifications, records, files, memoranda,
notes, reports, files, correspondence, financial and sales data, pricing lists
or terms, trading terms, training materials and methods, marketing,
distribution, and merchandising techniques and strategies, evaluations, opinions
and interpretations, together with all other writings or materials of any type
embodying any of the foregoing and any and all other technical, operating,
financial, and business information or materials relating to the Company, its
customers
or its or
their respective affiliates, whether or not reduced to writing or other medium
and whether or not marked or labeled confidential, proprietary, or the like,
regardless of whether created by me, others or both. Confidential
Information does not include information that is or becomes public domain
without fault on my part. I will have the burden of proof with
respect to the exclusion of any information from the definition of “Confidential
Information.”
With respect to Confidential
Information of the Company, its customers and its or their respective
affiliates, I agree that:
(a) The Confidential
Information is and will continue to be the sole and exclusive property of the
Company;
(b) Except as required under
applicable law or pursuant to any judicial process or administrative proceeding
with subpoena powers, I will use the Confidential Information only in the
performance of my duties for the Company. I will not use the
Confidential Information at any time (during or after my employment with the
Company or any of its affiliates) for my personal benefit, for the benefit of
any other Person or in any manner adverse to the interests of the Company, its
customers or its or their respective affiliates;
(c) Except as required under
applicable law or pursuant to any judicial process or administrative proceeding
with subpoena powers, I will not disclose the Confidential Information at any
time (during or after my employment with the Company or any of its affiliates)
except to authorized Company personnel, unless the Company consents in advance
in writing or unless the Confidential Information indisputably becomes of public
knowledge or enters the public domain (without fault on my part);
(d) I will safeguard the
Confidential Information by all reasonable steps and abide by all policies and
procedures of the Company and its customers in effect from time to time
regarding storage, copying, destroying, publication or posting, or handling of
such Confidential Information, in whatever medium or format that Confidential
Information takes;
(e) Except as required under
applicable law or pursuant to any judicial process or administrative proceeding
with subpoena powers, I will execute and abide by all confidentiality agreements
that the Company reasonably requests me to sign or abide by, whether those
agreements are for the benefit of the Company, an affiliate or an actual or a
potential customer or supplier thereof;
(f) I will return all
materials containing or relating to Confidential Information, together with all
other Company or customer property, to the Company when my employment with the
Company or any of its affiliates terminates (either voluntary or involuntary) or
upon the Company’s earlier request. I shall not retain any copies or
reproductions of correspondence, memoranda, reports, notebooks, drawings,
photographs, or other documents relating in any way to the business or affairs
of the Company, its customers or its or their respective affiliates;
and
(g) Upon any termination of
my employment with the Company, I will acknowledge to the Company, in writing
and under oath, in the form attached hereto as
Exhibit
A
that I have
complied with this Agreement.
As used herein, the term “
Person
” means an
individual, a partnership, a corporation, a limited liability company, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization or a governmental entity or department, agency or subdivision of
the government entity.
For purposes of clauses (b), (c) and
(e), in the event of any required disclosure, I will promptly notify the Company
and reasonably cooperate and assist the Company in resisting such disclosure in
the event it chooses to do so.
2.
Contributions
and Inventions
.
While employed by the Company, I may make Contributions and Inventions
deemed by the Company to have value to it. The terms “
Contributions
” and
“
Inventions
”
are understood to include all information, ideas, concepts, technology,
improvements, discoveries, formulae, inventions, creations, discoveries,
techniques, designs, methods, trade secrets, technical specifications and data,
works, modifications, processes, know-how, show-how, concepts, expressions,
improvements, works of authorship (including computer programs), ideas and other
developments, whether or not they are patentable or copyrightable or subject to
analogous protection and regardless of their form or state of development and
whether or not I have made them alone or with others, together with any and all
rights to U.S. or foreign applications for patents, inventor’s certifications or
other industrial rights that may be filed thereon, including divisions,
continuations-in-part, reissues and/or extensions thereof.
This Agreement covers Contributions and
Inventions of any kind that are conceived or made by me, alone or with others,
while I am employed by the Company, regardless of whether they are conceived or
made during regular working hours or at my place of work (whether located at the
Company, customer facilities, at home or elsewhere) and that (i) relate to the
Company’s business or potential business or that of its affiliates, (ii) result
from tasks assigned to me by the Company, or (iii) are conceived or made with
the use of the Company’s time, facilities, resources, or
materials. With respect to Contributions or Inventions covered by
this Agreement, I agree that:
(a) I will disclose them
promptly to the Company. I will not disclose them to anyone other
than authorized Company personnel;
(b) They will belong solely
to the Company from conception as “works made for hire” (as that term is used
under U.S. copyright law) or otherwise. To the extent that title to any such
Contributions and Inventions do not, by operation of law, vest in the Company, I
hereby irrevocably assign to the Company all right, title and interest,
including, without limitation, tangible and intangible rights such as patent
rights, trademarks, and copyrights, that I may have or may acquire in and to all
such Contributions and Inventions, benefits and/or rights resulting therefrom,
and agree to promptly execute any further specific assignments related to such
Contributions or Inventions, benefits and/or rights at the request of the
Company. If the Company wants more specific or formal evidence of
this, I will sign written documents of assignment at the Company’s
request. I also hereby assign to the Company, or waive if not
assignable, all “moral rights” in and to any Contributions and Inventions and
agree promptly to execute any further specific assignments or waivers related to
moral rights at the request of the Company; and
(c) I will, at any time,
either during the time I am employed by the Company or thereafter, assist the
Company in obtaining and maintaining patent, copyright, trademark, mask works
and other protection for them, in all countries and territories, at the
Company’s expense. In the event that the Company is unable to secure
my signature after reasonable effort in connection with any patent, trademark,
copyright, mask work or other similar protection relating to a Contribution or
an Invention, I hereby irrevocably designate and appoint the Company and its
duly authorized officers and agents as my agent and attorney-in-fact, to act for
and on my behalf and stead to execute and file any such application and to do
all other lawfully permitted acts to further the prosecution and issuance of
patents, trademarks, copyrights, mask works or other similar protection thereon
with the same legal force and effect as if executed by me.
(d) Any Contributions or
Inventions relating to the business of the Company and disclosed to the Company
within 6 months following the termination of my employment shall be deemed to
fall within the provisions of this Section 2. The “business of the
Company’ as used in this Section 2 includes the actual business conducted by the
Company or any of its affiliates at any time during my employment with the
Company, as well as any business in which the Company or any of its affiliates,
at any time during my employment with the Company, proposes or proposes to
engage.
3.
Obligations
to Prior Employers or Others
. I do not have any
non-disclosure, non-compete, non-solicitation or other obligations to any
previous employer or other Person that would prohibit, limit, conflict or
interfere with my obligations under this Agreement or the performance of my
duties for the Company. I will not disclose to the Company or its
customers or induce the Company or its customers to use any secret or
confidential information or material belonging to others, including my former
employers, if any.
4.
Excluded
Information
. A complete list, by non-confidential descriptive
title of all Contributions, Inventions, ideas, reports or other creative works,
if any, made or conceived by me prior to my employment by the Company and
intended to be excluded from this Agreement, is attached as
Exhibit
B
. I shall
not assert any rights under any Contributions, Inventions, ideas, reports or
other creative works as having been made or acquired by me prior to my being
employed by the Company, unless such Contributions, Inventions, ideas, reports
or other creative works are identified on
Exhibit
B
. If,
after the date of this Agreement, I believe that any Contribution or Invention
is excluded from this Agreement, I agree to obtain written authorization from
the Company, prior to applying for any patent on the Contribution or Invention,
and prior to taking any steps to commercially exploit the Contribution or
Invention.
5.
Covenant
Against Competition and Solicitation
.
(a) I acknowledge and
understand that, in view of my position as an employee of the Company, I may
have previously been afforded, or in the future may be afforded, access to the
Company’s Confidential Information and that of its affiliates. I
therefore agree that during the course of my employment with the Company or any
of its affiliates and for a period of 18 months after termination of my
employment with the Company and all of its affiliates (for any reason or no
reason) (the “
Restricted Period
”),
I will not, anywhere within the United States of America or any other country or
territory in which the Company or its affiliates conducts business, either
directly or indirectly, whether alone or as an employee, employer, consultant,
independent contractor, agent, principal, partner, joint venturer, stockholder,
member, officer, director or otherwise of any company or other business
enterprise, or in any other individual or representative capacity, engage in,
assist in, participate in, or otherwise be connected to or benefit from any
Competitive Business. As used in this Agreement, “
Competitive Business
”
shall mean any individual, entity, or business enterprise that is engaged in or
is seeking to engage in: (i) the development, design, manufacture, marketing,
sale and/or distribution of tracking and monitoring products; or (ii)
the development, design, manufacture, marketing, sale and/or distribution of any
products that are directly competitive with products that (a) represent at least
10% of the Company’s consolidated product revenues, (b) were first sold or
distributed by the Company or any of its affiliates during the preceding
12-month period, or (c) are being developed, produced, marketed and/or
distributed by the Company or any of its affiliates and are scheduled to be
first sold or distributed by the Company within a 12-month period; provided,
however, that for purposes of this definition, a business shall be a
“Competitive Business,” as it applies during the 12 month period after
termination of my employment only if the Company is engaged or is actively
seeking to engage in that business on the date of my termination of employment
with the Company or was engaged or actively seeking to engage in that business
at any time during the preceding 12 months.
(b) During the Restricted
Period, I will not, without the express prior written consent of the Company,
directly or indirectly: (i) solicit, induce, or assist any third
person in soliciting or inducing any Person that is (or was at any time within
the 12 months prior to the solicitation or inducement) an employee, consultant,
independent contractor or agent of the Company or any of its affiliates to leave
the employment of the Company or any of its affiliates or cease performing
services as an independent contractor, consultant or agent of the Company or any
of its affiliates; (ii) hire, engage, or assist any third party in hiring or
engaging, any individual that is or was (at any time within the 12 months prior
to the attempted hiring) an employee of the Company or any of its affiliates; or
(iii) contact, communicate, solicit, or transact any business with or assist any
third party in contacting, communicating, soliciting, or transacting any
business with any Person that is or was (at any time within 12 months prior to
the contact, communication, solicitation, or transaction) a customer,
distributor or supplier of the Company or its affiliates (or Person who, at any
time during the 12 months prior to the contact, communication, solicitation, or
transaction, the Company or its affiliates contacted, communicated with or
solicited for the purposes of becoming a customer, distributor, or supplier of
the Company or its affiliates and I was in any way involved or otherwise had
knowledge of or reasonably should have had knowledge of such contact,
communication, or solicitation) for the purposes of inducing such customer,
distributor, or supplier or potential customer, distributor, or supplier to be
connected to or benefit from any business competitive with that of the Company
or its affiliates or terminate its or their business relationship with the
Company or its affiliates.
6.
Non-Disparagement
. I
will not at any time (during or after my employment with the Company) disparage
the reputation of the Company, its affiliates, or any of its or their respective
officers and directors.
7.
Interpretation
and Scope of this Agreement
.
(a) In
the event that any court of competent jurisdiction shall determine that any one
or more of the provisions contained in this Agreement shall be unenforceable in
any respect, then such provision shall be deemed limited and restricted to the
extent that the court shall deem the provision to be enforceable. It
is the intention of the parties to this Agreement that the covenants and
restrictions in this Agreement be given the broadest interpretation permitted by
law. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
hereof. The covenants and restrictions contained in this Agreement
shall be deemed a series of separate covenants and restrictions. If,
in any judicial proceeding, a court of competent jurisdiction should refuse to
enforce all of the separate covenants and restrictions in this Agreement, then
such unenforceable covenants and restrictions shall be deemed eliminated from
the provisions of this Agreement for the purpose of such proceeding to the
extent necessary to permit the remaining separate covenants and restrictions to
be enforced in such proceeding.
(b) I
acknowledge that the restrictions on the activities in which I may engage that
are set forth in this Agreement and the location and period of time for which
such restrictions apply are reasonable and necessary to protect the legitimate
business interests of the Company and shall survive the termination of my
employment. I understand that the Company’s business is global and,
accordingly, the restrictions cannot be limited to any particular geographic
area. I further acknowledge that the restrictions contained in this
Agreement will not prevent me from earning a livelihood during the applicable
period of restriction.
(c) I
understand and agree that if I breach or threaten to breach any of the
provisions of this Agreement, including, without limitation, the provisions of
Sections 1, 2, 5 or 6 hereof, the Company would suffer irreparable harm and
damages would be an inadequate remedy. Accordingly, I acknowledge
that, in the event of any breach or threatened breach by me of any of the
provisions of this Agreement, the Company shall be entitled to temporary,
preliminary and permanent injunctive or other equitable relief in any court of
competent jurisdiction (without being required to post a bond or other
collateral) and to an equitable accounting of all earnings, profits and other
benefits arising, directly or indirectly, from such violation, which rights
shall be cumulative and in addition to (rather than instead of) any other rights
or remedies to which the Company may be entitled at law or in
equity. In addition (and not instead of those rights), I further
covenant that I shall be responsible for payment of the reasonable fees and
expenses of the Company’s attorneys and experts, as well as the Company’s court
costs, pertaining to any suit, arbitration, mediation, action or other
proceeding (including the costs of any investigation related thereto) in which
the Company prevails, arising directly or indirectly out of my violation or
threatened violation of any of the provisions of this Agreement. If
the Company does not prevail in any suit, arbitration, mediation, action or
other proceeding arising directly or indirectly out of my purported violation of
any of the provisions of this Agreement, the Company shall be responsible for
payment of the reasonable fees and expenses of attorneys and experts that I
incur, as well as my court costs, pertaining to any such suit, arbitration,
mediation, action or other proceeding (including the costs of any investigation
related thereto).
(d) This
Agreement shall be binding upon me, my heirs, assigns and personal
representatives and shall inure to the benefit of the Company, its affiliates
and their respective successors and assigns (including, without limitation, the
purchaser of all or substantially all of its assets).
(e) This
Agreement shall constitute the entire agreement between Company and myself with
respect to the matters covered hereby and shall supersede all previous written,
oral or implied understandings between us with respect to such
matters.
(f) I
acknowledge that my employment with the Company is “at-will.” I
understand that nothing contained in this Agreement shall give me a right to
continue in the employ of the Company, and the right to terminate my employment
with the Company, at any time, with or without cause, is specifically reserved
to the Company. I also understand that I may resign from employment
with the Company at any time in my discretion.
(g) Any
and all actions or controversies arising out of this Agreement, Employee’s
employment by the Company or termination therefrom, including, without
limitation, tort claims, shall be construed and enforced in accordance with the
internal laws of the State of New Jersey, without regard to the choice of law
principles thereof.
I represent and warrant
that: (a) I have read this Agreement; (b) I understand all the terms
and conditions hereof; (c) I have entered into this Agreement of my own free
will and volition; (d) I have been advised by the Company to seek and have, to
the extent I have deemed necessary, received the advice of counsel of any own
selection; and (e) the terms of this Agreement are fair, reasonable and are
being agreed to voluntarily in exchange for my continued employment with the
Company and the severance agreement effective as of June 29, 2009, the
restricted stock award granted pursuant to the restricted stock award agreement
dated as of June 29, 2009, the restricted stock unit award granted pursuant to
the restricted stock unit award agreement dated as of June 29, 2009 and the
stock option grant pursuant to the stock option grant agreement with a grant
date of June 29, 2009.
Date:
9-22-09
|
/s/ Jeffrey Jagid
|
|
Name: Jeffrey
Jagid
|
Accepted:
|
|
|
|
I.D.
SYSTEMS, INC.
|
|
|
|
|
By:
|
/s/ Ned Mavrommatis
|
|
EXHIBIT
A
STATE OF
NEW JERSEY
COUNTY OF
_________________
The undersigned, being duly sworn, does
hereby certify that he/she has complied with, and will continue to comply with,
for the applicable period set forth therein, all of the terms of the
Confidentiality, Assignment of Contributions and Inventions, Non Competition and
Non-Solicitation Agreement dated _______ __, 200_ by the Undersigned in favor of
I.D. Systems, Inc. (the “Company”). I have returned all Company
property and all materials relating to or containing Confidential Information to
the Company and I have not retained any copies or reproductions of any
correspondence, memoranda, reports, notebooks, drawings, photographs or other
documents or materials relating to the affairs of the Company, its customers and
its or their affiliates.
Sworn and
Subscribed to
before me
this ____ day of
______________,
______
EXHIBIT
B
Excluded
Information
(See
Section 4. If None, type “NONE”)
NONE
Exhibit
10.2
SEVERANCE
AGREEMENT
This SEVERANCE AGREEMENT (the “
Agreement
”) is made
this 11
th
day of
September, 2009, by and between I.D. Systems, Inc., a Delaware corporation (the
“
Company
”) and
Ned Mavrommatis (“
Executive
”).
BACKGROUND:
WHEREAS, Executive is currently
employed as Chief Financial Officer
of the Company;
and
WHEREAS, the Board of Directors of the
Company (the "
Board
") has
determined it is in the best interests of the Company to enter into this
Agreement to, among other things, help retain and motivate Executive in his
position with the Company.
NOW, THEREFORE, in consideration of the
foregoing premises and for other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereto hereby agree
as follows:
1.
Certain
Definitions
: As used in the Agreement, the following terms
shall have the respective meanings set forth below:
(a) "
Affiliate
" of the
Company means any Person that controls, is controlled by, or is under common
control with, the Company. A Person shall be deemed to be in control
of another Person if, and for so long as, it owns or controls more than 50% of
the voting power in the election of directors (or, in the case of an entity that
is not a corporation, for the election of the corresponding managing authority)
of such other Person.
(b) “
Cause
” means
Executive’s (i) conviction of, or plea of nolo contendere to, a felony or crime
involving moral turpitude; (ii) fraud on or misappropriation of any funds or
property of the Company; (iii) willful violation of any law, rule or regulation
(other than minor traffic violations or similar offenses or solely as a result
of vicarious liability) or breach of fiduciary duty which results in personal
profit to Executive. Executive shall be given notice of the
termination of Executive's employment for Cause and shall have an opportunity to
be heard by the Board with respect thereto and, to the extent that the Board
deems the matter curable, shall have a reasonable period of time to cure the
matter to the Board's reasonable satisfaction.
(c) “
Change in Control
Event
” means the occurrence of any of the following events with respect
to the Company:
(i) the consummation of any
consolidation or merger of the Company in which the holders of the Company's
common stock, par value $0.01 per share ("
Common Stock
")
immediately prior to such consolidation or merger own less than fifty percent
(50%) of the outstanding common stock of the surviving corporation immediately
after the merger; or
(ii) the
consummation of any sale, lease, exchange or other transfer (in one transaction
or a series of related transactions) of all, or substantially all, of the assets
of the Company, other than to a subsidiary or Affiliate; or
(iii) any
action pursuant to which any person or group (as such terms are defined in
Section 13(d) of the Securities Exchange Act of 1934, as amended (the "
Exchange Act
"), shall
become the “beneficial owner” (as such term is defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of shares of capital stock entitled to
vote generally for the election of directors of the Company (“
Voting Securities
”)
representing more than thirty (30%) percent of the combined voting power of the
Company’s then outstanding Voting Securities (calculated as provided in Rule
13d-3(d) in the case of rights to acquire any such securities); or
(iv) the
individuals (x) who, as of the effective date of this Agreement, constitute the
Board (the “
Original
Directors
”) and (y) who thereafter are elected to the Board and whose
election, or nomination for election, to the Board was approved by a vote of a
majority of the Original Directors then still in office (such Directors being
called “
Additional
Original Directors
”) and (z) who thereafter are elected to the Board and
whose election or nomination for election to the Board was approved by a vote of
a majority of the Original Directors and Additional Original Directors then
still in office, cease for any reason to constitute a majority of the members of
the Board.
(d) "
Disability
" means
that Executive is incapable of performing his principal duties due to physical
or mental incapacity or impairment for 120 consecutive days, or for 180
non-consecutive days, during any 12 month period.
(e) “
Good Reason
” means
(i) a material reduction in Executive’s base salary as in effect from time to
time; (ii) a material reduction in Executive's authority, duties or
responsibilities; (iii) Executive’s principal office location being moved to a
location which is more than 25 miles from the principal office location at which
Executive performs services on the date this Agreement is executed or (iv) a
material breach by the Company of the agreement under which Executive provides
services to the Company; provided, however, that Executive must notify the
Company, within 90 days of the occurrence of any of the foregoing conditions,
that he considers it to be a "Good Reason" condition, and provide the Company
with at least 30 days in which to cure the condition. In addition,
the resignation may not occur later than 6 months after the occurrence of the
condition giving rise to the resignation. If Executive fails to
provide such notice and cure period prior to his resignation, or his resignation
occurs later than 6 months after the initial occurrence of the condition, his
resignation shall not be deemed to be for "Good Reason" and Executive shall be
deemed to have waived any right to receive any of the payments or benefits set
forth in Section 2 hereof.
(f) “
Person
” means an
individual, a partnership, a limited liability company, a corporation, an
association, a joint stock corporation, a trust, a joint venture, an
unincorporated organization, or any court, administrative agency or commission
or other federal, state, county, local or foreign governmental authority,
instrumentality, agency or commission.
(g) “
Release
” means a
general release agreement in the form annexed hereto as
Exhibit A
and made a
part hereof.
(h) “
Trigger Event
” means
the occurrence of either: (i) the termination of Executive’s employment by the
Company other than a termination for Cause; or (ii) Executive’s resignation for
Good Reason within 6 months following a Change in Control Event. For
purposes of clarity, a termination of Executive's employment due to his death or
Disability shall not be considered a termination of Executive's employment by
the Company other than for Cause, and shall not constitute a Trigger
Event.
2.
Trigger Event Payments and
Benefits
.
Within 45 days after the occurrence of
a Trigger Event (or such shorter period as may be required by the Release),
Executive shall execute and deliver to the Company the Release. Upon
the sooner of the expiration of any applicable revocation period required for
the Release to be effective with respect to age discrimination claims and the
date on which it is otherwise permitted to be effective and irrevocable under
applicable law (such sooner date the “
Release Effective
Date
”), Executive shall be entitled to:
(a) cash
payments (collectively the "
Severance Payment
")
at the rate of Executive’s annual base salary as in effect immediately prior to
the Trigger Event for a period of 12 months (the "
Severance Period
"),
payable as set forth below. The Severance Payment shall be made as a
series of separate payments in accordance with the Company's standard payroll
practices (and subject to all applicable tax withholdings and deductions),
commencing with the first regular payroll date on or immediately following the
60th day after the date of the Trigger Event.
(b) if
Executive timely elects "COBRA" coverage and provided Executive continues to
make contributions for such continuation coverage equal to Executive’s
contribution amount in effect immediately preceding the date of Executive’s
termination of employment, the Company shall waive the remaining portion of
Executive’s healthcare continuation payments under COBRA for the Severance
Period. Notwithstanding the foregoing, in the event that Executive
becomes eligible to obtain alternate healthcare coverage from a new employer
before the end of the Severance Period, the Company’s obligation to waive the
remaining portion of Executive’s healthcare continuation coverage under COBRA
shall cease. Executive understands and affirms that Executive is
obligated to inform the Company if Executive becomes eligible to obtain
alternate healthcare coverage from a new employer before the end of the
Severance Period.
(c) Executive's
previously granted Company stock options and restricted stock ("
Retention Shares
”)
shall (to the extent not already then "vested"), partially "vest" and a portion
of the stock options shall be exercisable, in each case on a pro-rated basis,
taking into account the number of months elapsed since the date of grant as
compared to the scheduled vesting date. For example, if the total
number of months from the grant date until the vesting date is 36 months, and
the Trigger Event occurs at the end of the 12th month after the grant date, then
effective on the Release Effective Date, the total number of vested options and
vested Retention Shares should be equal to 1/3 (
i.e.,
12/36
)
of the total number of each
granted. Notwithstanding anything to the contrary contained herein,
the terms of the I.D. Systems, Inc. 2007 Equity Compensation Plan (the “
Plan
”) shall govern
acceleration of vesting of stock options and restricted stock in the event of a
“Change of Control” as defined in the Plan.
(d) The
“
Performance
Shares
” subject to the Restricted Stock Unit Award Agreement between
Executive and the Company dated as of June 29, 2009 shall be awarded in an
amount and to the extent of the sum of the “Interim Shares” determined (and
defined) in accordance with
Exhibit A
to that
agreement. For example, if a Trigger Event occurs on May 1, 2010, and
the Administrator (as defined in the Plan) has determined that the Stock Price
Target of a stock price of $7.50 has been met with respect to the fiscal year
ended December 31, 2009, then the number of Performance Shares that shall be
awarded upon the Trigger Event (effective on the Release Effective Date) shall
be the number equal to 1/3 of the number of Performance Shares listed in the
table (contained in the Restricted Stock Unit Award Agreement) corresponding to
a stock price of $7.50.
3.
Covenants
Agreement
. As a condition to the Company's obligations
hereunder, Executive shall execute and deliver to the Company an agreement in
the form of
Exhibit
B
annexed hereto and made a part hereof relating to confidentiality,
assignment of inventions, non-competition and non-solicitation. The
non-competition and non-solicitation covenants shall apply for a period equal to
the Severance Period.
4.
At Will
Employment
. Nothing in this Agreement shall alter Executive’s
status as an “at-will” employee.
5.
Headings
. Headings
used in this Agreement are for convenience of reference only and do not affect
the meaning of any provision.
6.
Counterparts
. This
Agreement may be executed as of the same effective date in one or more
counterparts, each of which shall be deemed an original.
7.
Binding Agreement;
Assignment
. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns.
8.
Governing Law;
Jurisdiction
. This Agreement and any and all matters arising
directly or indirectly herefrom shall be governed by, and construed in
accordance with, the internal laws of the State of New Jersey, without reference
to the choice of law principles thereof. Any legal action, suit or
other proceeding arising out of or in any way connected with this Agreement
shall be brought in the courts of the State of New Jersey, or in the United
States courts for the District of New Jersey. With respect to any
such proceeding in any such court: (i) each party generally and unconditionally
submits itself and its property to the exclusive jurisdiction of such court (and
corresponding appellate courts therefrom), and (ii) each party waives, to the
fullest extent permitted by law, any objection it has or hereafter may have the
venue of such proceeding as well as any claim that it has or may have that such
proceeding is in an inconvenient forum.
9.
Amendments
. This
Agreement may only be amended or otherwise modified, and the provisions hereof
may only be waived, by a writing executed by the parties hereto.
10.
Entire
Agreement
. This Agreement shall constitute the entire
agreement of the parties with respect to the matters covered hereby and shall
supersede all previous written, oral or implied understandings between them with
respect to such matters.
11.
Opportunity to Consult
Counsel
. Executive hereby acknowledges that he has read and
fully understands this Agreement, that he has been advised that Lowenstein
Sandler
PC
is counsel to
the Company and not to Executive, and that Executive has been advised to, and
has had the opportunity to, consult with counsel and Executive’s personal
financial or tax advisor with respect to this Agreement.
12.
No Effect on Other
Benefits
. Notwithstanding anything contained herein to the
contrary, nothing contained herein shall adversely affect the rights of
Executive and his dependents and beneficiaries to any and all benefits to which
any of them may be entitled under the benefit plans and arrangements of the
Company in accordance with the terms of such benefit plans and
arrangements.
13.
Section
409A
.
(a) This
Agreement is intended to comply with the requirements of Section 409A of the
Code and regulations promulgated thereunder (“
Section
409A
”). To the extent that any provision in this Agreement is
ambiguous as to its compliance with Section 409A, the provision shall be read in
such a manner so that no payments due under this Agreement shall be subject to
an "additional tax" as defined in Section 409A(a)(1)(B) of the
Code. For purposes of Section 409A, each payment made under this
Agreement shall be treated as a separate payment. In no event may
Executive, directly or indirectly, designate the calendar year of
payment.
(b) Notwithstanding
anything to the contrary contained herein, if necessary to comply with the
restriction in Section 409A(a)(2)(B) of the Code concerning payments to
“specified employees,” any payment on account of Executive’s separation from
service that would otherwise be due hereunder within six months after such
separation shall nonetheless be delayed until the first business day of the
seventh month following Executive’s date of termination and the first such
payment shall include the cumulative amount of any payments that would have been
paid prior to such date if not for such restriction, together with interest on
such cumulative amount during the period of such restriction at a rate, per
annum, equal to the applicable federal short-term rate (compounded monthly) in
effect under Section 1274(d) of the Code on the date of
termination. For purposes of Section 2 hereof, Executive shall be a
“specified employee” for the 12-month period beginning on the first day of the
fourth month following each “Identification Date” if he is a “key employee” (as
defined in Section 416(i) of the Code without regard to Section 416(i)(5)
thereof) of the Company at any time during the 12-month period ending on the
“Identification Date.” For purposes of the foregoing, the
Identification Date shall be December 31. Notwithstanding anything
contained herein to the contrary, Executive shall not be considered to have
terminated employment with the Company for purposes of Section 2 hereof unless
he would be considered to have incurred a “termination of employment” from the
Company within the meaning of Treasury Regulation
§1.409A-1(h)(1)(ii).
(c) Executive
acknowledges that any tax liability incurred by Executive under Section 409A of
the Code is solely the responsibility of Executive.
14.
No
Mitigation
. Executive shall be under no obligation to seek
other employment after Executive's termination of employment with the Company,
and the obligations of the Company to Executive which arise pursuant to Section
2 of this Agreement shall not be subject to mitigation or
offset.
IN WITNESS WHEREOF, the parties hereto
have executed this Agreement as of the date first written above.
|
|
I.D.
SYSTEMS, INC.
|
|
|
|
|
|
By:
|
/s/ Jeffrey Jagid
|
|
|
|
Name: Jeffrey
Jagid
|
|
|
|
Title: Chairman
and CEO
|
|
|
|
Date: 9-22-09
|
|
|
|
WITNESS:
|
|
EXECUTIVE:
|
|
|
|
/s/ Ken Ehrman
|
|
/s/ Ned Mavrommatis
|
Name: Ken
Ehrman
|
|
Name: Ned
Mavrommatis
|
Date: Sep
22, 2009
|
|
Date: 9/22/09
|
EXHIBIT
A
FORM
OF RELEASE
SEPARATION AND GENERAL
RELEASE AGREEMENT
This Separation and General Release
Agreement (the "
Agreement
") is
entered into between _______________ with an address at
_____________________________ (the “
Employee
") and I.D.
Systems, Inc. ("
ID
Systems
"), together with its parent, divisions, affiliates, and
subsidiaries and their respective officers, directors, employees, shareholders,
members, partners, plan administrators, attorneys, and agents, as well as any
predecessors, future successors or assigns or estates of any of the foregoing
with an address at One University Plaza, 6
th
Floor,
Hackensack, New Jersey 07601 (the “
Released
Parties
”).
1.
Separation of
Employment
. Employee acknowledges and understands that
Employee’s last day of employment with ID Systems was _______________ (the
“
Separation
Date
”). Employee acknowledges and agrees that, except as
otherwise provided in this Agreement, Employee has received all compensation and
benefits to which Employee is entitled as a result of Employee’s
employment. Employee understands that, except as otherwise provided
in this Agreement, Employee is entitled to nothing further from any of the
Released Parties, including reinstatement by ID Systems.
2.
Employee General Release of
Released Parties
. In consideration of the payments and
benefits set forth in Section 4 below, Employee hereby unconditionally and
irrevocably releases, waives, discharges, and gives up, to the full extent
permitted by law, any and all Claims (as defined below) that Employee may have
against any of the Released Parties, arising on or prior to the date of
Employee’s execution and delivery of this Agreement to ID
Systems. “
Claims
” means any and
all actions, charges, controversies, demands, causes of action, suits, rights,
and/or claims whatsoever for debts, sums of money, wages, salary, severance pay,
commissions, bonuses, unvested stock options, vacation pay, sick pay, fees and
costs, attorneys fees, losses, penalties, damages, including damages for pain
and suffering and emotional harm, arising, directly or indirectly, out of any
promise, agreement, offer letter, contract, understanding, common law, tort, the
laws, statutes, and/or regulations of the State of New Jersey or any other state
and the United States, including, but not limited to, federal and state
whistleblower laws, Title VII of the Civil Rights Act of 1964, the Civil Rights
Act of 1991, the Equal Pay Act, the Americans with Disabilities Act, the Family
and Medical Leave Act, the Employment Retirement Income Security Act (excluding
COBRA), the Vietnam Era Veterans Readjustment Assistance Act, the Fair Credit
Reporting Act, the Age Discrimination in Employment Act (“
ADEA
”), the Older
Workers’ Benefit Protection Act, the Occupational Safety and Health Act, the
Sarbanes-Oxley Act of 2002, the New Jersey Law Against Discrimination, the New
Jersey Family Leave Act, the New Jersey Civil Rights Act, and the New Jersey
Conscientious Employee Protection Act, as each may be amended from time to time,
whether arising directly or indirectly from any act or omission, whether
intentional or unintentional. This Section 2 releases all
Claims including those of which Employee is not aware and those not mentioned in
this Agreement. Employee specifically releases any and all Claims
arising out of Employee’s employment with ID Systems or separation
therefrom. Employee expressly acknowledges and agrees that, by
entering into this Agreement, Employee is releasing and waiving any and all
Claims, including, without limitation, Claims that Employee may having arising
under ADEA, which have arisen on or before the date of Employee’s execution and
delivery of this Agreement to ID Systems.
3.
Representations; Covenant
Not to Sue
. Employee hereby represents and warrants to the
Released Parties that Employee has not: (A) filed, caused or permitted to be
filed any pending proceeding (nor has Employee lodged a complaint with any
governmental or quasi-governmental authority) against any of the Released
Parties, nor has Employee agreed to do any of the foregoing; (B) assigned,
transferred, sold, encumbered, pledged, hypothecated, mortgaged, distributed, or
otherwise disposed of or conveyed to any third party any right or Claim against
any of the Released Parties that has been released in this Agreement; or (C)
directly or indirectly assisted any third party in filing, causing or assisting
to be filed, any Claim against any of the Released Parties. Except as
set forth in Section 11 below, Employee covenants and agrees that he shall not
encourage or solicit or voluntarily assist or participate in any way in the
filing, reporting or prosecution by herself or any third party of a proceeding
or Claim against any of the Released Parties.
4.
Payment
. As
good consideration for Employee’s execution, delivery, and non-revocation of
this Agreement, ID Systems shall provide Employee with the payments and benefits
set forth in Section 2 of the Severance Agreement between Employee and ID
Systems dated as of June 29, 2009, payable as set forth
therein. Employee acknowledges that Employee is not otherwise
entitled to receive the payments and benefits described in this Section 4 and
acknowledges that nothing in this Agreement shall be deemed to be an admission
of liability on the part of any of the Released Parties. Employee
agrees that Employee will not seek anything further from any of the Released
Parties.
5.
Who is
Bound
. ID Systems and Employee are bound by this
Agreement. Anyone who succeeds to Employee’s rights and
responsibilities, such as the executors of Employee’s estate, is bound, and
anyone who succeeds to ID Systems’s rights and responsibilities, such as its
successors and assigns, is also bound.
6.
Cooperation.
Employee agrees that, within five business days of the Separation Date, he shall
provide ID Systems (attention: _________) with a written comprehensive summary
of all outstanding work activities, current and prospective customer contact
information, and otherwise reasonably cooperate as necessary to effect a
transition of his responsibilities. Employee also agrees that he will
cease from communicating with any current ID Systems employees (with the
exception of __________________) regarding ID Systems personnel or other
business-related matters. Employee agrees to reasonably cooperate in
any ID Systems investigations and/or litigation regarding events that occurred
during Employee’s tenure with ID Systems. ID Systems will compensate
Employee for reasonable expenses Employee incurs in extending such cooperation
regarding investigations and/or litigation, so long as Employee provides advance
written notice of Employee’s request for
compensation.
7.
Non Disparagement and
Confidentiality
. Employee agrees not to make any defamatory or
derogatory statements concerning any of the Released
Parties. Provided inquiries are directed to ID Systems’ Department of
Human Resources, ID Systems shall disclose to prospective employers information
limited to Employee’s dates of employment and last position held by
Employee. Employee confirms and agrees that Employee shall not,
directly or indirectly, disclose to any person or entity or use for Employee’s
own benefit, any confidential information concerning the business, finances or
operations of ID Systems or its customers; provided, however, that Employee’s
obligations under this Section 7 shall not apply to information generally known
in ID Systems’ industry through no fault of Employee or the disclosure of which
is required by law after reasonable notice has been provided to ID Systems
sufficient to enable ID Systems to contest the
disclosure. Confidential information shall include, without
limitation, trade secrets, customer lists, details of contracts, pricing
policies, operational materials, marketing plans or strategies, security and
safety plans and strategies, project development, and any other non-public or
confidential information of, or relating to, ID Systems or its
affiliates. Employee also agrees that the amounts paid to Employee
and all of the other terms of this Agreement shall be kept confidential, unless
ID Systems discloses them in a public filing. Employee acknowledges
that he continues to be bound by the Confidentiality, Assignment of
Contributions and Inventions, Non-Competition and Non-Solicitation Agreement
(the “
Covenants
Agreement
”).
8.
Remedies
. If
Employee tells anyone the amount paid to Employee or any other term of this
Agreement (unless ID Systems has publicly disclosed the terms of this Agreement
in a public filing), breaches any other term or condition of this Agreement or
the Covenants Agreement, or any representation made by Employee in this
Agreement was false when made, it shall constitute a material breach of this
Agreement and, in addition to and not instead of the Released Parties’ other
remedies hereunder, under the Covenants Agreement or otherwise at law or in
equity, Employee shall be required to immediately, upon written notice from ID
Systems, return the payments paid by ID Systems hereunder, less
$500. Employee agrees that if Employee is required to return the
payments, this Agreement shall continue to be binding on Employee and the
Released Parties shall be entitled to enforce the provisions of this Agreement
as if the payments had not been repaid to ID Systems and ID Systems shall have
no further payment obligations to Employee hereunder. Further, in the
event of a material breach of this Agreement, Employee agrees to pay all of the
Released Parties’ attorneys’ fees and other costs associated with enforcing this
Agreement.
9.
ID Systems
Property
. Employee represents that he has returned all ID
Systems property in Employee’s possession, custody or control, including, but
not limited to, all ID Systems equipment, samples, laptop computers, personal
digital assistants, cell phones, pass codes, keys, swipe cards, documents or
other materials that Employee received, prepared, or helped
prepare. Employee represents that Employee has not retained any
copies, duplicates, reproductions, computer disks, or excerpts thereof of ID
Systems’ documents.
10.
Construction of
Agreement
. In the event that one or more of the provisions
contained in this Agreement shall for any reason be held unenforceable in any
respect under the law of any state of the United States or the United States,
such unenforceability shall not affect any other provision of this Agreement,
but this Agreement shall then be construed as if such unenforceable provision or
provisions had never been contained herein or therein. If it is ever
held that any restriction hereunder is too broad to permit enforcement of such
restriction to its fullest extent, such restriction shall be enforced to the
maximum extent permitted by applicable law. This Agreement and any
and all matters arising directly or indirectly herefrom or therefrom shall be
governed under the laws of the State of New Jersey, without reference to choice
of law rules. ID Systems and Employee consent to the sole
jurisdiction of the federal and state courts of New Jersey.
ID SYSTEMS AND EMPLOYEE HEREBY WAIVE
THEIR RESPECTIVE RIGHT TO TRIAL BY JURY IN ANY ACTION CONCERNING THIS AGREEMENT
OR ANY AND ALL MATTERS ARISING DIRECTLY OR INDIRECTLY HEREFROM AND REPRESENT
THAT THEY HAVE CONSULTED WITH COUNSEL OF THEIR CHOICE OR HAVE CHOSEN VOLUNTARILY
NOT TO DO SO SPECIFICALLY WITH RESPECT TO THIS WAIVER.
11.
Acknowledgments
. ID
Systems and Employee acknowledge and agree that:
(A) By entering into this
Agreement, Employee does not waive any rights or Claims that may arise after the
date that Employee executes and delivers this Agreement to ID
Systems;
(B) This
Agreement shall not affect the rights and responsibilities of the Equal
Employment Opportunity Commission (the “
EEOC
”) to enforce the
ADEA and other laws, and further acknowledge and agree that this Agreement shall
not be used to justify interfering with Employee’s protected right to file a
charge or participate in an investigation or proceeding conducted by the
EEOC. Accordingly, nothing in this Agreement shall preclude Employee
from filing a charge with, or participating in any manner in an investigation,
hearing or proceeding conducted by, the EEOC, but Employee hereby waives any and
all rights to recover under, or by virtue of, any such investigation, hearing or
proceeding;
(C) Notwithstanding anything
set forth in this Agreement to the contrary, nothing in this Agreement shall
affect or be used to interfere with Employee’s protected right to test in any
court, under the Older Workers’ Benefit Protection Act, or like statute or
regulation, the validity of the waiver of rights under ADEA set forth in this
Agreement; and
(D) Nothing in this
Agreement shall preclude Employee from: exercising Employee’s rights, if any (i)
under Section 601-608 of the Employee Retirement Income Security Act of 1974, as
amended, popularly known as COBRA, or (ii)
ID Systems’s pension
plan or 401(k) plan, if applicable.
12.
Opportunity For
Review
.
(A) Employee
represents and warrants that Employee: (i) has had sufficient opportunity to
consider this Agreement; (ii) has read this Agreement; (iii) understands all the
terms and conditions hereof; (iv) is not incompetent or had a guardian,
conservator or trustee appointed for Employee; (v) has entered into this
Agreement of Employee’s own free will and volition; (vi) has duly executed and
delivered this Agreement; (vii) understands that Employee is responsible for
Employee’s own attorney’s fees and costs; (viii) has had the opportunity to
review this Agreement with counsel of Employee’s choice or has chosen
voluntarily not to do so; (ix) understands the Employee has been given
twenty-one (21) days to review this Agreement before signing this Agreement and
understands that he is free to use as much or as little of the 21-day period as
he wishes or considers necessary before deciding to sign this Agreement; (x)
understands that if Employee does not sign and return this Agreement to ID
Systems within 21 days of his receipt, ID Systems shall have no obligation to
enter into this Agreement, Employee shall not be entitled to the payments and
benefits set forth in Section 4 of this Agreement, and the Separation Date shall
be unaltered; and (xi) this Agreement is valid, binding and enforceable against
the parties to this Agreement in accordance with its terms.
(B) This
Agreement shall be effective and enforceable on the eighth (8
th
) day
after execution and delivery to ID Systems by Employee. The parties
to this Agreement understand and agree that Employee may revoke this Agreement
after having executed and delivered it to ID Systems by so advising ID Systems
in writing no later than 11:59 p.m. on the seventh (7
th
) day
after Employee’s execution and delivery of this Agreement to ID
Systems. If Employee revokes this Agreement, it shall not be
effective or enforceable, Employee shall not be entitled to the payments and
benefits set forth in Section 4 of this Agreement, and the Separation Date shall
be unaltered.
Agreed to
and accepted on this ____ day of ________, 20__.
Agreed to
and accepted on this ____ day of ________, 20__.
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ID
SYSTEMS, INC.
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Name:
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Title:
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EXHIBIT
B
FORM
OF COVENANTS AGREEMENT
I.D.
SYSTEMS, INC.
Confidentiality,
Assignment of Contributions and
Inventions,
Non-Competition, and Non-Solicitation Agreement
Background
. I
am a paid employee of I.D. Systems, Inc., a Delaware corporation (the “
Company
”). I
am executing this Agreement in consideration of my continued
employment with the
Company and the severance agreement effective as of June 29, 2009, the
restricted stock award granted pursuant to the restricted stock award agreement
dated as of June 29, 2009, the restricted stock unit award granted pursuant to
the restricted stock unit award agreement dated as of June 29, 2009 and the
stock option grant pursuant to the stock option grant agreement with a grant
date of June 29, 2009.
1.
Confidentiality
. While
working for the Company, I may have previously developed or acquired, or may in
the future develop or acquire, knowledge in my work or from my colleagues or
otherwise of Confidential Information relating to the Company, its business,
potential business or that of its customers
or its or their
respective affiliates. “
Confidential
Information
” includes information concerning the identity of customers or
their requirements or key contacts within the customer’s organization,
suppliers, distributors, software programs, demonstration programs, routines,
algorithms, computer systems, plans, strategies, research, formulations,
processes, production methods and sources, products and specifications,
equipment manufacturing and other techniques, designs, know-how, show how, trade
secrets, inventions, improvements, discoveries, concepts, methodology, formulas,
drawings, maps, manuals, models, specifications, records, files, memoranda,
notes, reports, files, correspondence, financial and sales data, pricing lists
or terms, trading terms, training materials and methods, marketing,
distribution, and merchandising techniques and strategies, evaluations, opinions
and interpretations, together with all other writings or materials of any type
embodying any of the foregoing and any and all other technical, operating,
financial, and business information or materials relating to the Company, its
customers
or its or
their respective affiliates, whether or not reduced to writing or other medium
and whether or not marked or labeled confidential, proprietary, or the like,
regardless of whether created by me, others or both. Confidential
Information does not include information that is or becomes public domain
without fault on my part. I will have the burden of proof with
respect to the exclusion of any information from the definition of “Confidential
Information.”
With respect to Confidential
Information of the Company, its customers and its or their respective
affiliates, I agree that:
(a) The Confidential
Information is and will continue to be the sole and exclusive property of the
Company;
(b) Except as required under
applicable law or pursuant to any judicial process or administrative proceeding
with subpoena powers, I will use the Confidential Information only in the
performance of my duties for the Company. I will not use the
Confidential Information at any time (during or after my employment with the
Company or any of its affiliates) for my personal benefit, for the benefit of
any other Person or in any manner adverse to the interests of the Company, its
customers or its or their respective affiliates;
(c) Except as required under
applicable law or pursuant to any judicial process or administrative proceeding
with subpoena powers, I will not disclose the Confidential Information at any
time (during or after my employment with the Company or any of its affiliates)
except to authorized Company personnel, unless the Company consents in advance
in writing or unless the Confidential Information indisputably becomes of public
knowledge or enters the public domain (without fault on my part);
(d) I will safeguard the
Confidential Information by all reasonable steps and abide by all policies and
procedures of the Company and its customers in effect from time to time
regarding storage, copying, destroying, publication or posting, or handling of
such Confidential Information, in whatever medium or format that Confidential
Information takes;
(e) Except as required under
applicable law or pursuant to any judicial process or administrative proceeding
with subpoena powers, I will execute and abide by all confidentiality agreements
that the Company reasonably requests me to sign or abide by, whether those
agreements are for the benefit of the Company, an affiliate or an actual or a
potential customer or supplier thereof;
(f) I will return all
materials containing or relating to Confidential Information, together with all
other Company or customer property, to the Company when my employment with the
Company or any of its affiliates terminates (either voluntary or involuntary) or
upon the Company’s earlier request. I shall not retain any copies or
reproductions of correspondence, memoranda, reports, notebooks, drawings,
photographs, or other documents relating in any way to the business or affairs
of the Company, its customers or its or their respective affiliates;
and
(g) Upon any termination of
my employment with the Company, I will acknowledge to the Company, in writing
and under oath, in the form attached hereto as
Exhibit
A
that I have
complied with this Agreement.
As used herein, the term “
Person
” means an
individual, a partnership, a corporation, a limited liability company, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization or a governmental entity or department, agency or subdivision of
the government entity.
For purposes of clauses (b), (c) and
(e), in the event of any required disclosure, I will promptly notify the Company
and reasonably cooperate and assist the Company in resisting such disclosure in
the event it chooses to do so.
2.
Contributions
and Inventions
.
While employed by the Company, I may make Contributions and Inventions
deemed by the Company to have value to it. The terms “
Contributions
” and
“
Inventions
”
are understood to include all information, ideas, concepts, technology,
improvements, discoveries, formulae, inventions, creations, discoveries,
techniques, designs, methods, trade secrets, technical specifications and data,
works, modifications, processes, know-how, show-how, concepts, expressions,
improvements, works of authorship (including computer programs), ideas and other
developments, whether or not they are patentable or copyrightable or subject to
analogous protection and regardless of their form or state of development and
whether or not I have made them alone or with others, together with any and all
rights to U.S. or foreign applications for patents, inventor’s certifications or
other industrial rights that may be filed thereon, including divisions,
continuations-in-part, reissues and/or extensions thereof.
This Agreement covers Contributions and
Inventions of any kind that are conceived or made by me, alone or with others,
while I am employed by the Company, regardless of whether they are conceived or
made during regular working hours or at my place of work (whether located at the
Company, customer facilities, at home or elsewhere) and that (i) relate to the
Company’s business or potential business or that of its affiliates, (ii) result
from tasks assigned to me by the Company, or (iii) are conceived or made with
the use of the Company’s time, facilities, resources, or
materials. With respect to Contributions or Inventions covered by
this Agreement, I agree that:
(a) I will disclose them
promptly to the Company. I will not disclose them to anyone other
than authorized Company personnel;
(b) They will belong solely
to the Company from conception as “works made for hire” (as that term is used
under U.S. copyright law) or otherwise. To the extent that title to any such
Contributions and Inventions do not, by operation of law, vest in the Company, I
hereby irrevocably assign to the Company all right, title and interest,
including, without limitation, tangible and intangible rights such as patent
rights, trademarks, and copyrights, that I may have or may acquire in and to all
such Contributions and Inventions, benefits and/or rights resulting therefrom,
and agree to promptly execute any further specific assignments related to such
Contributions or Inventions, benefits and/or rights at the request of the
Company. If the Company wants more specific or formal evidence of
this, I will sign written documents of assignment at the Company’s
request. I also hereby assign to the Company, or waive if not
assignable, all “moral rights” in and to any Contributions and Inventions and
agree promptly to execute any further specific assignments or waivers related to
moral rights at the request of the Company; and
(c) I will, at any time,
either during the time I am employed by the Company or thereafter, assist the
Company in obtaining and maintaining patent, copyright, trademark, mask works
and other protection for them, in all countries and territories, at the
Company’s expense. In the event that the Company is unable to secure
my signature after reasonable effort in connection with any patent, trademark,
copyright, mask work or other similar protection relating to a Contribution or
an Invention, I hereby irrevocably designate and appoint the Company and its
duly authorized officers and agents as my agent and attorney-in-fact, to act for
and on my behalf and stead to execute and file any such application and to do
all other lawfully permitted acts to further the prosecution and issuance of
patents, trademarks, copyrights, mask works or other similar protection thereon
with the same legal force and effect as if executed by me.
(d) Any Contributions or
Inventions relating to the business of the Company and disclosed to the Company
within 6 months following the termination of my employment shall be deemed to
fall within the provisions of this Section 2. The “business of the
Company’ as used in this Section 2 includes the actual business conducted by the
Company or any of its affiliates at any time during my employment with the
Company, as well as any business in which the Company or any of its affiliates,
at any time during my employment with the Company, proposes or proposes to
engage.
3.
Obligations
to Prior Employers or Others
. I do not have any
non-disclosure, non-compete, non-solicitation or other obligations to any
previous employer or other Person that would prohibit, limit, conflict or
interfere with my obligations under this Agreement or the performance of my
duties for the Company. I will not disclose to the Company or its
customers or induce the Company or its customers to use any secret or
confidential information or material belonging to others, including my former
employers, if any.
4.
Excluded
Information
. A complete list, by non-confidential descriptive
title of all Contributions, Inventions, ideas, reports or other creative works,
if any, made or conceived by me prior to my employment by the Company and
intended to be excluded from this Agreement, is attached as
Exhibit
B
. I shall
not assert any rights under any Contributions, Inventions, ideas, reports or
other creative works as having been made or acquired by me prior to my being
employed by the Company, unless such Contributions, Inventions, ideas, reports
or other creative works are identified on
Exhibit
B
. If,
after the date of this Agreement, I believe that any Contribution or Invention
is excluded from this Agreement, I agree to obtain written authorization from
the Company, prior to applying for any patent on the Contribution or Invention,
and prior to taking any steps to commercially exploit the Contribution or
Invention.
5.
Covenant
Against Competition and Solicitation
.
(a) I acknowledge and
understand that, in view of my position as an employee of the Company, I may
have previously been afforded, or in the future may be afforded, access to the
Company’s Confidential Information and that of its affiliates. I
therefore agree that during the course of my employment with the Company or any
of its affiliates and for a period of 12 months after termination of my
employment with the Company and all of its affiliates (for any reason or no
reason) (the “
Restricted Period
”),
I will not, anywhere within the United States of America or any other country or
territory in which the Company or its affiliates conducts business, either
directly or indirectly, whether alone or as an employee, employer, consultant,
independent contractor, agent, principal, partner, joint venturer, stockholder,
member, officer, director or otherwise of any company or other business
enterprise, or in any other individual or representative capacity, engage in,
assist in, participate in, or otherwise be connected to or benefit from any
Competitive Business. As used in this Agreement, “
Competitive Business
”
shall mean any individual, entity, or business enterprise that is engaged in or
is seeking to engage in: (i) the development, design, manufacture, marketing,
sale and/or distribution of tracking and monitoring products; or (ii)
the development, design, manufacture, marketing, sale and/or distribution of any
products that are directly competitive with products that (a) represent at least
10% of the Company’s consolidated product revenues, (b) were first sold or
distributed by the Company or any of its affiliates during the preceding
12-month period, or (c) are being developed, produced, marketed and/or
distributed by the Company or any of its affiliates and are scheduled to be
first sold or distributed by the Company within a 12-month period; provided,
however, that for purposes of this definition, a business shall be a
“Competitive Business,” as it applies during the 12 month period after
termination of my employment only if the Company is engaged or is actively
seeking to engage in that business on the date of my termination of employment
with the Company or was engaged or actively seeking to engage in that business
at any time during the preceding 12 months.
(b) During the Restricted
Period, I will not, without the express prior written consent of the Company,
directly or indirectly: (i) solicit, induce, or assist any third
person in soliciting or inducing any Person that is (or was at any time within
the 12 months prior to the solicitation or inducement) an employee, consultant,
independent contractor or agent of the Company or any of its affiliates to leave
the employment of the Company or any of its affiliates or cease performing
services as an independent contractor, consultant or agent of the Company or any
of its affiliates; (ii) hire, engage, or assist any third party in hiring or
engaging, any individual that is or was (at any time within the 12 months prior
to the attempted hiring) an employee of the Company or any of its affiliates; or
(iii) contact, communicate, solicit, or transact any business with or assist any
third party in contacting, communicating, soliciting, or transacting any
business with any Person that is or was (at any time within 12 months prior to
the contact, communication, solicitation, or transaction) a customer,
distributor or supplier of the Company or its affiliates (or Person who, at any
time during the 12 months prior to the contact, communication, solicitation, or
transaction, the Company or its affiliates contacted, communicated with or
solicited for the purposes of becoming a customer, distributor, or supplier of
the Company or its affiliates and I was in any way involved or otherwise had
knowledge of or reasonably should have had knowledge of such contact,
communication, or solicitation) for the purposes of inducing such customer,
distributor, or supplier or potential customer, distributor, or supplier to be
connected to or benefit from any business competitive with that of the Company
or its affiliates or terminate its or their business relationship with the
Company or its affiliates.
6.
Non-Disparagement
. I
will not at any time (during or after my employment with the Company) disparage
the reputation of the Company, its affiliates, or any of its or their respective
officers and directors.
7.
Interpretation
and Scope of this Agreement
.
(a) In
the event that any court of competent jurisdiction shall determine that any one
or more of the provisions contained in this Agreement shall be unenforceable in
any respect, then such provision shall be deemed limited and restricted to the
extent that the court shall deem the provision to be enforceable. It
is the intention of the parties to this Agreement that the covenants and
restrictions in this Agreement be given the broadest interpretation permitted by
law. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
hereof. The covenants and restrictions contained in this Agreement
shall be deemed a series of separate covenants and restrictions. If,
in any judicial proceeding, a court of competent jurisdiction should refuse to
enforce all of the separate covenants and restrictions in this Agreement, then
such unenforceable covenants and restrictions shall be deemed eliminated from
the provisions of this Agreement for the purpose of such proceeding to the
extent necessary to permit the remaining separate covenants and restrictions to
be enforced in such proceeding.
(b) I
acknowledge that the restrictions on the activities in which I may engage that
are set forth in this Agreement and the location and period of time for which
such restrictions apply are reasonable and necessary to protect the legitimate
business interests of the Company and shall survive the termination of my
employment. I understand that the Company’s business is global and,
accordingly, the restrictions cannot be limited to any particular geographic
area. I further acknowledge that the restrictions contained in this
Agreement will not prevent me from earning a livelihood during the applicable
period of restriction.
(c) I
understand and agree that if I breach or threaten to breach any of the
provisions of this Agreement, including, without limitation, the provisions of
Sections 1, 2, 5 or 6 hereof, the Company would suffer irreparable harm and
damages would be an inadequate remedy. Accordingly, I acknowledge
that, in the event of any breach or threatened breach by me of any of the
provisions of this Agreement, the Company shall be entitled to temporary,
preliminary and permanent injunctive or other equitable relief in any court of
competent jurisdiction (without being required to post a bond or other
collateral) and to an equitable accounting of all earnings, profits and other
benefits arising, directly or indirectly, from such violation, which rights
shall be cumulative and in addition to (rather than instead of) any other rights
or remedies to which the Company may be entitled at law or in
equity. In addition (and not instead of those rights), I further
covenant that I shall be responsible for payment of the reasonable fees and
expenses of the Company’s attorneys and experts, as well as the Company’s court
costs, pertaining to any suit, arbitration, mediation, action or other
proceeding (including the costs of any investigation related thereto) in which
the Company prevails, arising directly or indirectly out of my violation or
threatened violation of any of the provisions of this Agreement. If
the Company does not prevail in any suit, arbitration, mediation, action or
other proceeding arising directly or indirectly out of my purported violation of
any of the provisions of this Agreement, the Company shall be responsible for
payment of the reasonable fees and expenses of attorneys and experts that I
incur, as well as my court costs, pertaining to any such suit, arbitration,
mediation, action or other proceeding (including the costs of any investigation
related thereto).
(d) This
Agreement shall be binding upon me, my heirs, assigns and personal
representatives and shall inure to the benefit of the Company, its affiliates
and their respective successors and assigns (including, without limitation, the
purchaser of all or substantially all of its assets).
(e) This
Agreement shall constitute the entire agreement between Company and myself with
respect to the matters covered hereby and shall supersede all previous written,
oral or implied understandings between us with respect to such
matters.
(f) I
acknowledge that my employment with the Company is “at-will.” I
understand that nothing contained in this Agreement shall give me a right to
continue in the employ of the Company, and the right to terminate my employment
with the Company, at any time, with or without cause, is specifically reserved
to the Company. I also understand that I may resign from employment
with the Company at any time in my discretion.
(g) Any
and all actions or controversies arising out of this Agreement, Employee’s
employment by the Company or termination therefrom, including, without
limitation, tort claims, shall be construed and enforced in accordance with the
internal laws of the State of New Jersey, without regard to the choice of law
principles thereof.
I represent and warrant
that: (a) I have read this Agreement; (b) I understand all the terms
and conditions hereof; (c) I have entered into this Agreement of my own free
will and volition; (d) I have been advised by the Company to seek and have, to
the extent I have deemed necessary, received the advice of counsel of any own
selection; and (e) the terms of this Agreement are fair, reasonable and are
being agreed to voluntarily in exchange for my continued employment with the
Company and the severance agreement effective as of June 29, 2009, the
restricted stock award granted pursuant to the restricted stock award agreement
dated as of June 29, 2009, the restricted stock unit award granted pursuant to
the restricted stock unit award agreement dated as of June 29, 2009 and the
stock option grant pursuant to the stock option grant agreement with a grant
date of June 29, 2009.
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Date:
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9/22/09
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/s/ Ned Mavrommatis
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Name:
|
Accepted:
I.D.
SYSTEMS, INC.
EXHIBIT
A
STATE OF
NEW JERSEY
COUNTY OF
_________________
The undersigned, being duly sworn, does
hereby certify that he/she has complied with, and will continue to comply with,
for the applicable period set forth therein, all of the terms of the
Confidentiality, Assignment of Contributions and Inventions, Non Competition and
Non-Solicitation Agreement dated _______ __, 200_ by the Undersigned in favor of
I.D. Systems, Inc. (the “Company”). I have returned all Company
property and all materials relating to or containing Confidential Information to
the Company and I have not retained any copies or reproductions of any
correspondence, memoranda, reports, notebooks, drawings, photographs or other
documents or materials relating to the affairs of the Company, its customers and
its or their affiliates.
Sworn and
Subscribed to
before me
this ____ day of
______________,
______
EXHIBIT
B
Excluded
Information
(See
Section 4. If None, type “NONE”)
NONE
Exhibit
10.3
SEVERANCE
AGREEMENT
This SEVERANCE AGREEMENT (the “
Agreement
”) is made
this 11
th
day of
September, 2009, by and between I.D. Systems, Inc., a Delaware corporation (the
“
Company
”) and
Kenneth Ehrman (“
Executive
”).
BACKGROUND:
WHEREAS, Executive is currently
employed as President and Chief Operating Officer
of the Company;
and
WHEREAS, the Board of Directors of the
Company (the "
Board
") has
determined it is in the best interests of the Company to enter into this
Agreement to, among other things, help retain and motivate Executive in his
position with the Company.
NOW, THEREFORE, in consideration of the
foregoing premises and for other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereto hereby agree
as follows:
1.
Certain
Definitions
: As used in the Agreement, the following terms
shall have the respective meanings set forth below:
(a) "
Affiliate
" of the
Company means any Person that controls, is controlled by, or is under common
control with, the Company. A Person shall be deemed to be in control
of another Person if, and for so long as, it owns or controls more than 50% of
the voting power in the election of directors (or, in the case of an entity that
is not a corporation, for the election of the corresponding managing authority)
of such other Person.
(b) “
Cause
” means
Executive’s (i) conviction of, or plea of nolo contendere to, a felony or crime
involving moral turpitude; (ii) fraud on or misappropriation of any funds or
property of the Company; (iii) willful violation of any law, rule or regulation
(other than minor traffic violations or similar offenses or solely as a result
of vicarious liability) or breach of fiduciary duty which results in personal
profit to Executive. Executive shall be given notice of the
termination of Executive's employment for Cause and shall have an opportunity to
be heard by the Board with respect thereto and, to the extent that the Board
deems the matter curable, shall have a reasonable period of time to cure the
matter to the Board's reasonable satisfaction.
(c) “
Change in Control
Event
” means the occurrence of any of the following events with respect
to the Company:
(i) the consummation of any
consolidation or merger of the Company in which the holders of the Company's
common stock, par value $0.01 per share ("
Common Stock
")
immediately prior to such consolidation or merger own less than fifty percent
(50%) of the outstanding common stock of the surviving corporation immediately
after the merger; or
(ii) the
consummation of any sale, lease, exchange or other transfer (in one transaction
or a series of related transactions) of all, or substantially all, of the assets
of the Company, other than to a subsidiary or Affiliate; or
(iii) any
action pursuant to which any person or group (as such terms are defined in
Section 13(d) of the Securities Exchange Act of 1934, as amended (the "
Exchange Act
"), shall
become the “beneficial owner” (as such term is defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of shares of capital stock entitled to
vote generally for the election of directors of the Company (“
Voting Securities
”)
representing more than thirty (30%)percent of the combined voting power of the
Company’s then outstanding Voting Securities (calculated as provided in Rule
13d-3(d) in the case of rights to acquire any such securities); or
(iv) the
individuals (x) who, as of the effective date of this Agreement, constitute the
Board (the “
Original
Directors
”) and (y) who thereafter are elected to the Board and whose
election, or nomination for election, to the Board was approved by a vote of a
majority of the Original Directors then still in office (such Directors being
called “
Additional
Original Directors
”) and (z) who thereafter are elected to the Board and
whose election or nomination for election to the Board was approved by a vote of
a majority of the Original Directors and Additional Original Directors then
still in office, cease for any reason to constitute a majority of the members of
the Board.
(d) "
Disability
" means
that Executive is incapable of performing his principal duties due to physical
or mental incapacity or impairment for 120 consecutive days, or for 180
non-consecutive days, during any 12 month period.
(e) “
Good Reason
” means
(i) a material reduction in Executive’s base salary as in effect from time to
time; (ii) a material reduction in Executive's authority, duties or
responsibilities; (iii) Executive’s principal office location being moved to a
location which is more than 25 miles from the principal office location at which
Executive performs services on the date this Agreement is executed or (iv) a
material breach by the Company of the agreement under which Executive provides
services to the Company; provided, however, that Executive must notify the
Company, within 90 days of the occurrence of any of the foregoing conditions,
that he considers it to be a "Good Reason" condition, and provide the Company
with at least 30 days in which to cure the condition. In addition,
the resignation may not occur later than 6 months after the occurrence of the
condition giving rise to the resignation. If Executive fails to
provide such notice and cure period prior to his resignation, or his resignation
occurs later than 6 months after the initial occurrence of the condition, his
resignation shall not be deemed to be for "Good Reason" and Executive shall be
deemed to have waived any right to receive any of the payments or benefits set
forth in Section 2 hereof.
(f) “
Person
” means an
individual, a partnership, a limited liability company, a corporation, an
association, a joint stock corporation, a trust, a joint venture, an
unincorporated organization, or any court, administrative agency or commission
or other federal, state, county, local or foreign governmental authority,
instrumentality, agency or commission.
(g) “
Release
” means a
general release agreement in the form annexed hereto as
Exhibit A
and made a
part hereof.
(h) “
Trigger Event
” means
the occurrence of either: (i) the termination of Executive’s employment by the
Company other than a termination for Cause; or (ii) Executive’s resignation for
Good Reason within 6 months following a Change in Control Event. For
purposes of clarity, a termination of Executive's employment due to his death or
Disability shall not be considered a termination of Executive's employment by
the Company other than for Cause, and shall not constitute a Trigger
Event.
2.
Trigger Event Payments and
Benefits
.
Within 45 days after the occurrence of
a Trigger Event (or such shorter period as may be required by the Release),
Executive shall execute and deliver to the Company the Release. Upon
the sooner of the expiration of any applicable revocation period required for
the Release to be effective with respect to age discrimination claims and the
date on which it is otherwise permitted to be effective and irrevocable under
applicable law (such sooner date the “
Release Effective
Date
”), Executive shall be entitled to:
(a) cash
payments (collectively the "
Severance Payment
")
at the rate of Executive’s annual base salary as in effect immediately prior to
the Trigger Event for a period of 12 months (the "
Severance Period
"),
payable as set forth below. The Severance Payment shall be made as a
series of separate payments in accordance with the Company's standard payroll
practices (and subject to all applicable tax withholdings and deductions),
commencing with the first regular payroll date on or immediately following the
60th day after the date of the Trigger Event.
(b) if
Executive timely elects "COBRA" coverage and provided Executive continues to
make contributions for such continuation coverage equal to Executive’s
contribution amount in effect immediately preceding the date of Executive’s
termination of employment, the Company shall waive the remaining portion of
Executive’s healthcare continuation payments under COBRA for the Severance
Period. Notwithstanding the foregoing, in the event that Executive
becomes eligible to obtain alternate healthcare coverage from a new employer
before the end of the Severance Period, the Company’s obligation to waive the
remaining portion of Executive’s healthcare continuation coverage under COBRA
shall cease. Executive understands and affirms that Executive is
obligated to inform the Company if Executive becomes eligible to obtain
alternate healthcare coverage from a new employer before the end of the
Severance Period.
(c) Executive's
previously granted Company stock options and restricted stock ("
Retention Shares
”)
shall (to the extent not already then "vested"), partially "vest" and a portion
of the stock options shall be exercisable, in each case on a pro-rated basis,
taking into account the number of months elapsed since the date of grant as
compared to the scheduled vesting date. For example, if the total
number of months from the grant date until the vesting date is 36 months, and
the Trigger Event occurs at the end of the 12th month after the grant date, then
effective on the Release Effective Date, the total number of vested options and
vested Retention Shares should be equal to 1/3 (
i.e.,
12/36
)
of the total number of each
granted. Notwithstanding anything to the contrary contained herein,
the terms of the I.D. Systems, Inc. 2007 Equity Compensation Plan (the “
Plan
”) shall govern
acceleration of vesting of stock options and restricted stock in the event of a
“Change of Control” as defined in the Plan.
(d) The
“
Performance
Shares
” subject to the Restricted Stock Unit Award Agreement between
Executive and the Company dated as of June 29, 2009 shall be awarded in an
amount and to the extent of the sum of the “Interim Shares” determined (and
defined) in accordance with
Exhibit A
to that
agreement. For example, if a Trigger Event occurs on May 1, 2010, and
the Administrator (as defined in the Plan) has determined that the Stock Price
Target of a stock price of $7.50 has been met with respect to the fiscal year
ended December 31, 2009, then the number of Performance Shares that shall be
awarded upon the Trigger Event (effective on the Release Effective Date) shall
be the number equal to 1/3 of the number of Performance Shares listed in the
table (contained in the Restricted Stock Unit Award Agreement) corresponding to
a stock price of $7.50.
3.
Covenants
Agreement
. As a condition to the Company's obligations
hereunder, Executive shall execute and deliver to the Company an agreement in
the form of
Exhibit
B
annexed hereto and made a part hereof relating to confidentiality,
assignment of inventions, non-competition and non-solicitation. The
non-competition and non-solicitation covenants shall apply for a period equal to
the Severance Period.
4.
At Will
Employment
. Nothing in this Agreement shall alter Executive’s
status as an “at-will” employee.
5.
Headings
. Headings
used in this Agreement are for convenience of reference only and do not affect
the meaning of any provision.
6.
Counterparts
. This
Agreement may be executed as of the same effective date in one or more
counterparts, each of which shall be deemed an original.
7.
Binding Agreement;
Assignment
. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns.
8.
Governing Law;
Jurisdiction
. This Agreement and any and all matters arising
directly or indirectly herefrom shall be governed by, and construed in
accordance with, the internal laws of the State of New Jersey, without reference
to the choice of law principles thereof. Any legal action, suit or
other proceeding arising out of or in any way connected with this Agreement
shall be brought in the courts of the State of New Jersey, or in the United
States courts for the District of New Jersey. With respect to any
such proceeding in any such court: (i) each party generally and unconditionally
submits itself and its property to the exclusive jurisdiction of such court (and
corresponding appellate courts therefrom), and (ii) each party waives, to the
fullest extent permitted by law, any objection it has or hereafter may have the
venue of such proceeding as well as any claim that it has or may have that such
proceeding is in an inconvenient forum.
9.
Amendments
. This
Agreement may only be amended or otherwise modified, and the provisions hereof
may only be waived, by a writing executed by the parties hereto.
10.
Entire
Agreement
. This Agreement shall constitute the entire
agreement of the parties with respect to the matters covered hereby and shall
supersede all previous written, oral or implied understandings between them with
respect to such matters.
11.
Opportunity to Consult
Counsel
. Executive hereby acknowledges that he has read and
fully understands this Agreement, that he has been advised that Lowenstein
Sandler
PC
is counsel to
the Company and not to Executive, and that Executive has been advised to, and
has had the opportunity to, consult with counsel and Executive’s personal
financial or tax advisor with respect to this Agreement.
12.
No Effect on Other
Benefits
. Notwithstanding anything contained herein to the
contrary, nothing contained herein shall adversely affect the rights of
Executive and his dependents and beneficiaries to any and all benefits to which
any of them may be entitled under the benefit plans and arrangements of the
Company in accordance with the terms of such benefit plans and
arrangements.
13.
Section
409A
.
(a) This
Agreement is intended to comply with the requirements of Section 409A of the
Code and regulations promulgated thereunder (“
Section
409A
”). To the extent that any provision in this Agreement is
ambiguous as to its compliance with Section 409A, the provision shall be read in
such a manner so that no payments due under this Agreement shall be subject to
an "additional tax" as defined in Section 409A(a)(1)(B) of the
Code. For purposes of Section 409A, each payment made under this
Agreement shall be treated as a separate payment. In no event may
Executive, directly or indirectly, designate the calendar year of
payment.
(b) Notwithstanding
anything to the contrary contained herein, if necessary to comply with the
restriction in Section 409A(a)(2)(B) of the Code concerning payments to
“specified employees,” any payment on account of Executive’s separation from
service that would otherwise be due hereunder within six months after such
separation shall nonetheless be delayed until the first business day of the
seventh month following Executive’s date of termination and the first such
payment shall include the cumulative amount of any payments that would have been
paid prior to such date if not for such restriction, together with interest on
such cumulative amount during the period of such restriction at a rate, per
annum, equal to the applicable federal short-term rate (compounded monthly) in
effect under Section 1274(d) of the Code on the date of
termination. For purposes of Section 2 hereof, Executive shall be a
“specified employee” for the 12-month period beginning on the first day of the
fourth month following each “Identification Date” if he is a “key employee” (as
defined in Section 416(i) of the Code without regard to Section 416(i)(5)
thereof) of the Company at any time during the 12-month period ending on the
“Identification Date.” For purposes of the foregoing, the
Identification Date shall be December 31. Notwithstanding anything
contained herein to the contrary, Executive shall not be considered to have
terminated employment with the Company for purposes of Section 2 hereof unless
he would be considered to have incurred a “termination of employment” from the
Company within the meaning of Treasury Regulation
§1.409A-1(h)(1)(ii).
(c) Executive
acknowledges that any tax liability incurred by Executive under Section 409A of
the Code is solely the responsibility of Executive.
14.
No
Mitigation
. Executive shall be under no obligation to seek
other employment after Executive's termination of employment with the Company,
and the obligations of the Company to Executive which arise pursuant to Section
2 of this Agreement shall not be subject to mitigation or
offset.
IN WITNESS WHEREOF, the parties hereto
have executed this Agreement as of the date first written
above.
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I.D.
SYSTEMS, INC.
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By:
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/s/
Ned Mavrommatis
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Name:
Ned Mavrommatis
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Title:
CFO
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Date:
9/22/09
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WITNESS:
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EXECUTIVE:
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/s/ Michael Ehrman
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/s/ Ken Ehrman
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Name: Michael
Ehrman
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Name: Ken
Ehrman
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Date: 9/22/09
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Date: 9/22/09
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EXHIBIT
A
FORM
OF RELEASE
SEPARATION AND GENERAL
RELEASE AGREEMENT
This Separation and General Release
Agreement (the "
Agreement
") is
entered into between _______________ with an address at
_____________________________ (the “
Employee
") and I.D.
Systems, Inc. ("
ID
Systems
"), together with its parent, divisions, affiliates, and
subsidiaries and their respective officers, directors, employees, shareholders,
members, partners, plan administrators, attorneys, and agents, as well as any
predecessors, future successors or assigns or estates of any of the foregoing
with an address at One University Plaza, 6
th
Floor,
Hackensack, New Jersey 07601 (the “
Released
Parties
”).
1.
Separation of
Employment
. Employee acknowledges and understands that
Employee’s last day of employment with ID Systems was _______________ (the
“
Separation
Date
”). Employee acknowledges and agrees that, except as
otherwise provided in this Agreement, Employee has received all compensation and
benefits to which Employee is entitled as a result of Employee’s
employment. Employee understands that, except as otherwise provided
in this Agreement, Employee is entitled to nothing further from any of the
Released Parties, including reinstatement by ID Systems.
2.
Employee General Release of
Released Parties
. In consideration of the payments and
benefits set forth in Section 4 below, Employee hereby unconditionally and
irrevocably releases, waives, discharges, and gives up, to the full extent
permitted by law, any and all Claims (as defined below) that Employee may have
against any of the Released Parties, arising on or prior to the date of
Employee’s execution and delivery of this Agreement to ID
Systems. “
Claims
” means any and
all actions, charges, controversies, demands, causes of action, suits, rights,
and/or claims whatsoever for debts, sums of money, wages, salary, severance pay,
commissions, bonuses, unvested stock options, vacation pay, sick pay, fees and
costs, attorneys fees, losses, penalties, damages, including damages for pain
and suffering and emotional harm, arising, directly or indirectly, out of any
promise, agreement, offer letter, contract, understanding, common law, tort, the
laws, statutes, and/or regulations of the State of New Jersey or any other state
and the United States, including, but not limited to, federal and state
whistleblower laws, Title VII of the Civil Rights Act of 1964, the Civil Rights
Act of 1991, the Equal Pay Act, the Americans with Disabilities Act, the Family
and Medical Leave Act, the Employment Retirement Income Security Act (excluding
COBRA), the Vietnam Era Veterans Readjustment Assistance Act, the Fair Credit
Reporting Act, the Age Discrimination in Employment Act (“
ADEA
”), the Older
Workers’ Benefit Protection Act, the Occupational Safety and Health Act, the
Sarbanes-Oxley Act of 2002, the New Jersey Law Against Discrimination, the New
Jersey Family Leave Act, the New Jersey Civil Rights Act, and the New Jersey
Conscientious Employee Protection Act, as each may be amended from time to time,
whether arising directly or indirectly from any act or omission, whether
intentional or unintentional. This Section 2 releases all
Claims including those of which Employee is not aware and those not mentioned in
this Agreement. Employee specifically releases any and all Claims
arising out of Employee’s employment with ID Systems or separation
therefrom. Employee expressly acknowledges and agrees that, by
entering into this Agreement, Employee is releasing and waiving any and all
Claims, including, without limitation, Claims that Employee may having arising
under ADEA, which have arisen on or before the date of Employee’s execution and
delivery of this Agreement to ID Systems.
3.
Representations; Covenant
Not to Sue
. Employee hereby represents and warrants to the
Released Parties that Employee has not: (A) filed, caused or permitted to be
filed any pending proceeding (nor has Employee lodged a complaint with any
governmental or quasi-governmental authority) against any of the Released
Parties, nor has Employee agreed to do any of the foregoing; (B) assigned,
transferred, sold, encumbered, pledged, hypothecated, mortgaged, distributed, or
otherwise disposed of or conveyed to any third party any right or Claim against
any of the Released Parties that has been released in this Agreement; or (C)
directly or indirectly assisted any third party in filing, causing or assisting
to be filed, any Claim against any of the Released Parties. Except as
set forth in Section 11 below, Employee covenants and agrees that he shall not
encourage or solicit or voluntarily assist or participate in any way in the
filing, reporting or prosecution by herself or any third party of a proceeding
or Claim against any of the Released Parties.
4.
Payment
. As
good consideration for Employee’s execution, delivery, and non-revocation of
this Agreement, ID Systems shall provide Employee with the payments and benefits
set forth in Section 2 of the Severance Agreement between Employee and ID
Systems dated as of June 29, 2009, payable as set forth
therein. Employee acknowledges that Employee is not otherwise
entitled to receive the payments and benefits described in this Section 4 and
acknowledges that nothing in this Agreement shall be deemed to be an admission
of liability on the part of any of the Released Parties. Employee
agrees that Employee will not seek anything further from any of the Released
Parties.
5.
Who is
Bound
. ID Systems and Employee are bound by this
Agreement. Anyone who succeeds to Employee’s rights and
responsibilities, such as the executors of Employee’s estate, is bound, and
anyone who succeeds to ID Systems’s rights and responsibilities, such as its
successors and assigns, is also bound.
6.
Cooperation.
Employee agrees that, within five business days of the Separation Date, he shall
provide ID Systems (attention: _________) with a written comprehensive summary
of all outstanding work activities, current and prospective customer contact
information, and otherwise reasonably cooperate as necessary to effect a
transition of his responsibilities. Employee also agrees that he will
cease from communicating with any current ID Systems employees (with the
exception of __________________) regarding ID Systems personnel or other
business-related matters. Employee agrees to reasonably cooperate in
any ID Systems investigations and/or litigation regarding events that occurred
during Employee’s tenure with ID Systems. ID Systems will compensate
Employee for reasonable expenses Employee incurs in extending such cooperation
regarding investigations and/or litigation, so long as Employee provides advance
written notice of Employee’s request for
compensation.
7.
Non Disparagement and
Confidentiality
. Employee agrees not to make any defamatory or
derogatory statements concerning any of the Released
Parties. Provided inquiries are directed to ID Systems’ Department of
Human Resources, ID Systems shall disclose to prospective employers information
limited to Employee’s dates of employment and last position held by
Employee. Employee confirms and agrees that Employee shall not,
directly or indirectly, disclose to any person or entity or use for Employee’s
own benefit, any confidential information concerning the business, finances or
operations of ID Systems or its customers; provided, however, that Employee’s
obligations under this Section 7 shall not apply to information generally known
in ID Systems’ industry through no fault of Employee or the disclosure of which
is required by law after reasonable notice has been provided to ID Systems
sufficient to enable ID Systems to contest the
disclosure. Confidential information shall include, without
limitation, trade secrets, customer lists, details of contracts, pricing
policies, operational materials, marketing plans or strategies, security and
safety plans and strategies, project development, and any other non-public or
confidential information of, or relating to, ID Systems or its
affiliates. Employee also agrees that the amounts paid to Employee
and all of the other terms of this Agreement shall be kept confidential, unless
ID Systems discloses them in a public filing. Employee acknowledges
that he continues to be bound by the Confidentiality, Assignment of
Contributions and Inventions, Non-Competition and Non-Solicitation Agreement
(the “
Covenants
Agreement
”).
8.
Remedies
. If
Employee tells anyone the amount paid to Employee or any other term of this
Agreement (unless ID Systems has publicly disclosed the terms of this Agreement
in a public filing), breaches any other term or condition of this Agreement or
the Covenants Agreement, or any representation made by Employee in this
Agreement was false when made, it shall constitute a material breach of this
Agreement and, in addition to and not instead of the Released Parties’ other
remedies hereunder, under the Covenants Agreement or otherwise at law or in
equity, Employee shall be required to immediately, upon written notice from ID
Systems, return the payments paid by ID Systems hereunder, less
$500. Employee agrees that if Employee is required to return the
payments, this Agreement shall continue to be binding on Employee and the
Released Parties shall be entitled to enforce the provisions of this Agreement
as if the payments had not been repaid to ID Systems and ID Systems shall have
no further payment obligations to Employee hereunder. Further, in the
event of a material breach of this Agreement, Employee agrees to pay all of the
Released Parties’ attorneys’ fees and other costs associated with enforcing this
Agreement.
9.
ID Systems
Property
. Employee represents that he has returned all ID
Systems property in Employee’s possession, custody or control, including, but
not limited to, all ID Systems equipment, samples, laptop computers, personal
digital assistants, cell phones, pass codes, keys, swipe cards, documents or
other materials that Employee received, prepared, or helped
prepare. Employee represents that Employee has not retained any
copies, duplicates, reproductions, computer disks, or excerpts thereof of ID
Systems’ documents.
10.
Construction of
Agreement
. In the event that one or more of the provisions
contained in this Agreement shall for any reason be held unenforceable in any
respect under the law of any state of the United States or the United States,
such unenforceability shall not affect any other provision of this Agreement,
but this Agreement shall then be construed as if such unenforceable provision or
provisions had never been contained herein or therein. If it is ever
held that any restriction hereunder is too broad to permit enforcement of such
restriction to its fullest extent, such restriction shall be enforced to the
maximum extent permitted by applicable law. This Agreement and any
and all matters arising directly or indirectly herefrom or therefrom shall be
governed under the laws of the State of New Jersey, without reference to choice
of law rules. ID Systems and Employee consent to the sole
jurisdiction of the federal and state courts of New Jersey.
ID SYSTEMS AND EMPLOYEE HEREBY WAIVE
THEIR RESPECTIVE RIGHT TO TRIAL BY JURY IN ANY ACTION CONCERNING THIS AGREEMENT
OR ANY AND ALL MATTERS ARISING DIRECTLY OR INDIRECTLY HEREFROM AND REPRESENT
THAT THEY HAVE CONSULTED WITH COUNSEL OF THEIR CHOICE OR HAVE CHOSEN VOLUNTARILY
NOT TO DO SO SPECIFICALLY WITH RESPECT TO THIS WAIVER.
11.
Acknowledgments
. ID
Systems and Employee acknowledge and agree that:
(A) By entering into this
Agreement, Employee does not waive any rights or Claims that may arise after the
date that Employee executes and delivers this Agreement to ID
Systems;
(B) This
Agreement shall not affect the rights and responsibilities of the Equal
Employment Opportunity Commission (the “
EEOC
”) to enforce the
ADEA and other laws, and further acknowledge and agree that this Agreement shall
not be used to justify interfering with Employee’s protected right to file a
charge or participate in an investigation or proceeding conducted by the
EEOC. Accordingly, nothing in this Agreement shall preclude Employee
from filing a charge with, or participating in any manner in an investigation,
hearing or proceeding conducted by, the EEOC, but Employee hereby waives any and
all rights to recover under, or by virtue of, any such investigation, hearing or
proceeding;
(C) Notwithstanding anything
set forth in this Agreement to the contrary, nothing in this Agreement shall
affect or be used to interfere with Employee’s protected right to test in any
court, under the Older Workers’ Benefit Protection Act, or like statute or
regulation, the validity of the waiver of rights under ADEA set forth in this
Agreement; and
(D) Nothing in this
Agreement shall preclude Employee from: exercising Employee’s rights, if any (i)
under Section 601-608 of the Employee Retirement Income Security Act of 1974, as
amended, popularly known as COBRA, or (ii)
ID Systems’s pension
plan or 401(k) plan, if applicable.
12.
Opportunity For
Review
.
(A) Employee
represents and warrants that Employee: (i) has had sufficient opportunity to
consider this Agreement; (ii) has read this Agreement; (iii) understands all the
terms and conditions hereof; (iv) is not incompetent or had a guardian,
conservator or trustee appointed for Employee; (v) has entered into this
Agreement of Employee’s own free will and volition; (vi) has duly executed and
delivered this Agreement; (vii) understands that Employee is responsible for
Employee’s own attorney’s fees and costs; (viii) has had the opportunity to
review this Agreement with counsel of Employee’s choice or has chosen
voluntarily not to do so; (ix) understands the Employee has been given
twenty-one (21) days to review this Agreement before signing this Agreement and
understands that he is free to use as much or as little of the 21-day period as
he wishes or considers necessary before deciding to sign this Agreement; (x)
understands that if Employee does not sign and return this Agreement to ID
Systems within 21 days of his receipt, ID Systems shall have no obligation to
enter into this Agreement, Employee shall not be entitled to the payments and
benefits set forth in Section 4 of this Agreement, and the Separation Date shall
be unaltered; and (xi) this Agreement is valid, binding and enforceable against
the parties to this Agreement in accordance with its terms.
(B) This
Agreement shall be effective and enforceable on the eighth (8
th
) day
after execution and delivery to ID Systems by Employee. The parties
to this Agreement understand and agree that Employee may revoke this Agreement
after having executed and delivered it to ID Systems by so advising ID Systems
in writing no later than 11:59 p.m. on the seventh (7
th
) day
after Employee’s execution and delivery of this Agreement to ID
Systems. If Employee revokes this Agreement, it shall not be
effective or enforceable, Employee shall not be entitled to the payments and
benefits set forth in Section 4 of this Agreement, and the Separation Date shall
be unaltered.
Agreed to
and accepted on this ____ day of ________, 20__.
Witness:
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EMPLOYEE:
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Name:
|
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Agreed
to and accepted on this ____ day of ________, 20__.
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ID
SYSTEMS, INC.
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Name:
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Title:
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EXHIBIT
B
FORM
OF COVENANTS AGREEMENT
I.D.
SYSTEMS, INC.
Confidentiality,
Assignment of Contributions and
Inventions,
Non-Competition, and Non-Solicitation Agreement
Background
. I
am a paid employee of I.D. Systems, Inc., a Delaware corporation (the “
Company
”). I
am executing this Agreement in consideration of my continued
employment with the
Company and the severance agreement effective as of June 29, 2009, the
restricted stock award granted pursuant to the restricted stock award agreement
dated as of June 29, 2009, the restricted stock unit award granted pursuant to
the restricted stock unit award agreement dated as of June 29, 2009 and the
stock option grant pursuant to the stock option grant agreement with a grant
date of June 29, 2009.
1.
Confidentiality
. While
working for the Company, I may have previously developed or acquired, or may in
the future develop or acquire, knowledge in my work or from my colleagues or
otherwise of Confidential Information relating to the Company, its business,
potential business or that of its customers
or its or their
respective affiliates. “
Confidential
Information
” includes information concerning the identity of customers or
their requirements or key contacts within the customer’s organization,
suppliers, distributors, software programs, demonstration programs, routines,
algorithms, computer systems, plans, strategies, research, formulations,
processes, production methods and sources, products and specifications,
equipment manufacturing and other techniques, designs, know-how, show how, trade
secrets, inventions, improvements, discoveries, concepts, methodology, formulas,
drawings, maps, manuals, models, specifications, records, files, memoranda,
notes, reports, files, correspondence, financial and sales data, pricing lists
or terms, trading terms, training materials and methods, marketing,
distribution, and merchandising techniques and strategies, evaluations, opinions
and interpretations, together with all other writings or materials of any type
embodying any of the foregoing and any and all other technical, operating,
financial, and business information or materials relating to the Company, its
customers
or its or
their respective affiliates, whether or not reduced to writing or other medium
and whether or not marked or labeled confidential, proprietary, or the like,
regardless of whether created by me, others or both. Confidential
Information does not include information that is or becomes public domain
without fault on my part. I will have the burden of proof with
respect to the exclusion of any information from the definition of “Confidential
Information.”
With respect to Confidential
Information of the Company, its customers and its or their respective
affiliates, I agree that:
(a) The Confidential
Information is and will continue to be the sole and exclusive property of the
Company;
(b) Except as required under
applicable law or pursuant to any judicial process or administrative proceeding
with subpoena powers, I will use the Confidential Information only in the
performance of my duties for the Company. I will not use the
Confidential Information at any time (during or after my employment with the
Company or any of its affiliates) for my personal benefit, for the benefit of
any other Person or in any manner adverse to the interests of the Company, its
customers or its or their respective affiliates;
(c) Except as required under
applicable law or pursuant to any judicial process or administrative proceeding
with subpoena powers, I will not disclose the Confidential Information at any
time (during or after my employment with the Company or any of its affiliates)
except to authorized Company personnel, unless the Company consents in advance
in writing or unless the Confidential Information indisputably becomes of public
knowledge or enters the public domain (without fault on my part);
(d) I will safeguard the
Confidential Information by all reasonable steps and abide by all policies and
procedures of the Company and its customers in effect from time to time
regarding storage, copying, destroying, publication or posting, or handling of
such Confidential Information, in whatever medium or format that Confidential
Information takes;
(e) Except as required under
applicable law or pursuant to any judicial process or administrative proceeding
with subpoena powers, I will execute and abide by all confidentiality agreements
that the Company reasonably requests me to sign or abide by, whether those
agreements are for the benefit of the Company, an affiliate or an actual or a
potential customer or supplier thereof;
(f) I will return all
materials containing or relating to Confidential Information, together with all
other Company or customer property, to the Company when my employment with the
Company or any of its affiliates terminates (either voluntary or involuntary) or
upon the Company’s earlier request. I shall not retain any copies or
reproductions of correspondence, memoranda, reports, notebooks, drawings,
photographs, or other documents relating in any way to the business or affairs
of the Company, its customers or its or their respective affiliates;
and
(g) Upon any termination of
my employment with the Company, I will acknowledge to the Company, in writing
and under oath, in the form attached hereto as
Exhibit
A
that I have
complied with this Agreement.
As used herein, the term “
Person
” means an
individual, a partnership, a corporation, a limited liability company, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization or a governmental entity or department, agency or subdivision of
the government entity.
For purposes of clauses (b), (c) and
(e), in the event of any required disclosure, I will promptly notify the Company
and reasonably cooperate and assist the Company in resisting such disclosure in
the event it chooses to do so.
2.
Contributions
and Inventions
.
While employed by the Company, I may make Contributions and Inventions
deemed by the Company to have value to it. The terms “
Contributions
” and
“
Inventions
”
are understood to include all information, ideas, concepts, technology,
improvements, discoveries, formulae, inventions, creations, discoveries,
techniques, designs, methods, trade secrets, technical specifications and data,
works, modifications, processes, know-how, show-how, concepts, expressions,
improvements, works of authorship (including computer programs), ideas and other
developments, whether or not they are patentable or copyrightable or subject to
analogous protection and regardless of their form or state of development and
whether or not I have made them alone or with others, together with any and all
rights to U.S. or foreign applications for patents, inventor’s certifications or
other industrial rights that may be filed thereon, including divisions,
continuations-in-part, reissues and/or extensions thereof.
This Agreement covers Contributions and
Inventions of any kind that are conceived or made by me, alone or with others,
while I am employed by the Company, regardless of whether they are conceived or
made during regular working hours or at my place of work (whether located at the
Company, customer facilities, at home or elsewhere) and that (i) relate to the
Company’s business or potential business or that of its affiliates, (ii) result
from tasks assigned to me by the Company, or (iii) are conceived or made with
the use of the Company’s time, facilities, resources, or
materials. With respect to Contributions or Inventions covered by
this Agreement, I agree that:
(a) I will disclose them
promptly to the Company. I will not disclose them to anyone other
than authorized Company personnel;
(b) They will belong solely
to the Company from conception as “works made for hire” (as that term is used
under U.S. copyright law) or otherwise. To the extent that title to any such
Contributions and Inventions do not, by operation of law, vest in the Company, I
hereby irrevocably assign to the Company all right, title and interest,
including, without limitation, tangible and intangible rights such as patent
rights, trademarks, and copyrights, that I may have or may acquire in and to all
such Contributions and Inventions, benefits and/or rights resulting therefrom,
and agree to promptly execute any further specific assignments related to such
Contributions or Inventions, benefits and/or rights at the request of the
Company. If the Company wants more specific or formal evidence of
this, I will sign written documents of assignment at the Company’s
request. I also hereby assign to the Company, or waive if not
assignable, all “moral rights” in and to any Contributions and Inventions and
agree promptly to execute any further specific assignments or waivers related to
moral rights at the request of the Company; and
(c) I will, at any time,
either during the time I am employed by the Company or thereafter, assist the
Company in obtaining and maintaining patent, copyright, trademark, mask works
and other protection for them, in all countries and territories, at the
Company’s expense. In the event that the Company is unable to secure
my signature after reasonable effort in connection with any patent, trademark,
copyright, mask work or other similar protection relating to a Contribution or
an Invention, I hereby irrevocably designate and appoint the Company and its
duly authorized officers and agents as my agent and attorney-in-fact, to act for
and on my behalf and stead to execute and file any such application and to do
all other lawfully permitted acts to further the prosecution and issuance of
patents, trademarks, copyrights, mask works or other similar protection thereon
with the same legal force and effect as if executed by me.
(d) Any Contributions or
Inventions relating to the business of the Company and disclosed to the Company
within 6 months following the termination of my employment shall be deemed to
fall within the provisions of this Section 2. The “business of the
Company’ as used in this Section 2 includes the actual business conducted by the
Company or any of its affiliates at any time during my employment with the
Company, as well as any business in which the Company or any of its affiliates,
at any time during my employment with the Company, proposes or proposes to
engage.
3.
Obligations
to Prior Employers or Others
. I do not have any
non-disclosure, non-compete, non-solicitation or other obligations to any
previous employer or other Person that would prohibit, limit, conflict or
interfere with my obligations under this Agreement or the performance of my
duties for the Company. I will not disclose to the Company or its
customers or induce the Company or its customers to use any secret or
confidential information or material belonging to others, including my former
employers, if any.
4.
Excluded
Information
. A complete list, by non-confidential descriptive
title of all Contributions, Inventions, ideas, reports or other creative works,
if any, made or conceived by me prior to my employment by the Company and
intended to be excluded from this Agreement, is attached as
Exhibit
B
. I shall
not assert any rights under any Contributions, Inventions, ideas, reports or
other creative works as having been made or acquired by me prior to my being
employed by the Company, unless such Contributions, Inventions, ideas, reports
or other creative works are identified on
Exhibit
B
. If,
after the date of this Agreement, I believe that any Contribution or Invention
is excluded from this Agreement, I agree to obtain written authorization from
the Company, prior to applying for any patent on the Contribution or Invention,
and prior to taking any steps to commercially exploit the Contribution or
Invention.
5.
Covenant
Against Competition and Solicitation
.
(a) I acknowledge and
understand that, in view of my position as an employee of the Company, I may
have previously been afforded, or in the future may be afforded, access to the
Company’s Confidential Information and that of its affiliates. I
therefore agree that during the course of my employment with the Company or any
of its affiliates and for a period of 12 months after termination of my
employment with the Company and all of its affiliates (for any reason or no
reason) (the “
Restricted Period
”),
I will not, anywhere within the United States of America or any other country or
territory in which the Company or its affiliates conducts business, either
directly or indirectly, whether alone or as an employee, employer, consultant,
independent contractor, agent, principal, partner, joint venturer, stockholder,
member, officer, director or otherwise of any company or other business
enterprise, or in any other individual or representative capacity, engage in,
assist in, participate in, or otherwise be connected to or benefit from any
Competitive Business. As used in this Agreement, “
Competitive Business
”
shall mean any individual, entity, or business enterprise that is engaged in or
is seeking to engage in: (i) the development, design, manufacture, marketing,
sale and/or distribution of tracking and monitoring products; or (ii)
the development, design, manufacture, marketing, sale and/or distribution of any
products that are directly competitive with products that (a) represent at least
10% of the Company’s consolidated product revenues, (b) were first sold or
distributed by the Company or any of its affiliates during the preceding
12-month period, or (c) are being developed, produced, marketed and/or
distributed by the Company or any of its affiliates and are scheduled to be
first sold or distributed by the Company within a 12-month period; provided,
however, that for purposes of this definition, a business shall be a
“Competitive Business,” as it applies during the 12 month period after
termination of my employment only if the Company is engaged or is actively
seeking to engage in that business on the date of my termination of employment
with the Company or was engaged or actively seeking to engage in that business
at any time during the preceding 12 months.
(b) During the Restricted
Period, I will not, without the express prior written consent of the Company,
directly or indirectly: (i) solicit, induce, or assist any third
person in soliciting or inducing any Person that is (or was at any time within
the 12 months prior to the solicitation or inducement) an employee, consultant,
independent contractor or agent of the Company or any of its affiliates to leave
the employment of the Company or any of its affiliates or cease performing
services as an independent contractor, consultant or agent of the Company or any
of its affiliates; (ii) hire, engage, or assist any third party in hiring or
engaging, any individual that is or was (at any time within the 12 months prior
to the attempted hiring) an employee of the Company or any of its affiliates; or
(iii) contact, communicate, solicit, or transact any business with or assist any
third party in contacting, communicating, soliciting, or transacting any
business with any Person that is or was (at any time within 12 months prior to
the contact, communication, solicitation, or transaction) a customer,
distributor or supplier of the Company or its affiliates (or Person who, at any
time during the 12 months prior to the contact, communication, solicitation, or
transaction, the Company or its affiliates contacted, communicated with or
solicited for the purposes of becoming a customer, distributor, or supplier of
the Company or its affiliates and I was in any way involved or otherwise had
knowledge of or reasonably should have had knowledge of such contact,
communication, or solicitation) for the purposes of inducing such customer,
distributor, or supplier or potential customer, distributor, or supplier to be
connected to or benefit from any business competitive with that of the Company
or its affiliates or terminate its or their business relationship with the
Company or its affiliates.
6.
Non-Disparagement
. I
will not at any time (during or after my employment with the Company) disparage
the reputation of the Company, its affiliates, or any of its or their respective
officers and directors.
7.
Interpretation
and Scope of this Agreement
.
(a) In
the event that any court of competent jurisdiction shall determine that any one
or more of the provisions contained in this Agreement shall be unenforceable in
any respect, then such provision shall be deemed limited and restricted to the
extent that the court shall deem the provision to be enforceable. It
is the intention of the parties to this Agreement that the covenants and
restrictions in this Agreement be given the broadest interpretation permitted by
law. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
hereof. The covenants and restrictions contained in this Agreement
shall be deemed a series of separate covenants and restrictions. If,
in any judicial proceeding, a court of competent jurisdiction should refuse to
enforce all of the separate covenants and restrictions in this Agreement, then
such unenforceable covenants and restrictions shall be deemed eliminated from
the provisions of this Agreement for the purpose of such proceeding to the
extent necessary to permit the remaining separate covenants and restrictions to
be enforced in such proceeding.
(b) I
acknowledge that the restrictions on the activities in which I may engage that
are set forth in this Agreement and the location and period of time for which
such restrictions apply are reasonable and necessary to protect the legitimate
business interests of the Company and shall survive the termination of my
employment. I understand that the Company’s business is global and,
accordingly, the restrictions cannot be limited to any particular geographic
area. I further acknowledge that the restrictions contained in this
Agreement will not prevent me from earning a livelihood during the applicable
period of restriction.
(c) I
understand and agree that if I breach or threaten to breach any of the
provisions of this Agreement, including, without limitation, the provisions of
Sections 1, 2, 5 or 6 hereof, the Company would suffer irreparable harm and
damages would be an inadequate remedy. Accordingly, I acknowledge
that, in the event of any breach or threatened breach by me of any of the
provisions of this Agreement, the Company shall be entitled to temporary,
preliminary and permanent injunctive or other equitable relief in any court of
competent jurisdiction (without being required to post a bond or other
collateral) and to an equitable accounting of all earnings, profits and other
benefits arising, directly or indirectly, from such violation, which rights
shall be cumulative and in addition to (rather than instead of) any other rights
or remedies to which the Company may be entitled at law or in
equity. In addition (and not instead of those rights), I further
covenant that I shall be responsible for payment of the reasonable fees and
expenses of the Company’s attorneys and experts, as well as the Company’s court
costs, pertaining to any suit, arbitration, mediation, action or other
proceeding (including the costs of any investigation related thereto) in which
the Company prevails, arising directly or indirectly out of my violation or
threatened violation of any of the provisions of this Agreement. If
the Company does not prevail in any suit, arbitration, mediation, action or
other proceeding arising directly or indirectly out of my purported violation of
any of the provisions of this Agreement, the Company shall be responsible for
payment of the reasonable fees and expenses of attorneys and experts that I
incur, as well as my court costs, pertaining to any such suit, arbitration,
mediation, action or other proceeding (including the costs of any investigation
related thereto).
(d) This
Agreement shall be binding upon me, my heirs, assigns and personal
representatives and shall inure to the benefit of the Company, its affiliates
and their respective successors and assigns (including, without limitation, the
purchaser of all or substantially all of its assets).
(e) This
Agreement shall constitute the entire agreement between Company and myself with
respect to the matters covered hereby and shall supersede all previous written,
oral or implied understandings between us with respect to such
matters.
(f) I
acknowledge that my employment with the Company is “at-will.” I
understand that nothing contained in this Agreement shall give me a right to
continue in the employ of the Company, and the right to terminate my employment
with the Company, at any time, with or without cause, is specifically reserved
to the Company. I also understand that I may resign from employment
with the Company at any time in my discretion.
(g) Any
and all actions or controversies arising out of this Agreement, Employee’s
employment by the Company or termination therefrom, including, without
limitation, tort claims, shall be construed and enforced in accordance with the
internal laws of the State of New Jersey, without regard to the choice of law
principles thereof.
I
represent and warrant that: (a) I have read this Agreement; (b) I
understand all the terms and conditions hereof; (c) I have entered into this
Agreement of my own free will and volition; (d) I have been advised by the
Company to seek and have, to the extent I have deemed necessary, received the
advice of counsel of any own selection; and (e) the terms of this Agreement are
fair, reasonable and are being agreed to voluntarily in exchange for my
continued employment with the Company and the severance agreement effective as
of June 29, 2009, the restricted stock award granted pursuant to the restricted
stock award agreement dated as of June 29, 2009, the restricted stock unit award
granted pursuant to the restricted stock unit award agreement dated as of June
29, 2009 and the stock option grant pursuant to the stock option grant agreement
with a grant date of June 29, 2009.
Date:
9/22/09
|
/s/
Ken Ehrman
|
|
Name: Ken
Ehrman
|
|
Accepted:
|
I.D.
SYSTEMS, INC.
|
|
|
|
By:
|
/s/ Ned Mavrommatis
|
|
EXHIBIT
A
STATE OF
NEW JERSEY
COUNTY OF
_________________
The undersigned, being duly sworn, does
hereby certify that he/she has complied with, and will continue to comply with,
for the applicable period set forth therein, all of the terms of the
Confidentiality, Assignment of Contributions and Inventions, Non Competition and
Non-Solicitation Agreement dated _______ __, 200_ by the Undersigned in favor of
I.D. Systems, Inc. (the “Company”). I have returned all Company
property and all materials relating to or containing Confidential Information to
the Company and I have not retained any copies or reproductions of any
correspondence, memoranda, reports, notebooks, drawings, photographs or other
documents or materials relating to the affairs of the Company, its customers and
its or their affiliates.
Sworn and
Subscribed to
before me
this ____ day of
______________,
______
_________________________________
EXHIBIT
B
Excluded
Information
(See
Section 4. If None, type “NONE”)
NONE
Exhibit
10.4
SEVERANCE
AGREEMENT
This SEVERANCE AGREEMENT (the “
Agreement
”) is made
this 11
th
day of
September, 2009, by and between I.D. Systems, Inc., a Delaware corporation (the
“
Company
”) and
Michael Ehrman (“
Executive
”).
BACKGROUND:
WHEREAS, Executive is currently
employed as EVP of Engineering
of the Company;
and
WHEREAS, the Board of Directors of the
Company (the "
Board
") has
determined it is in the best interests of the Company to enter into this
Agreement to, among other things, help retain and motivate Executive in his
position with the Company.
NOW, THEREFORE, in consideration of the
foregoing premises and for other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereto hereby agree
as follows:
1.
Certain
Definitions
: As used in the Agreement, the following terms
shall have the respective meanings set forth below:
(a) "
Affiliate
" of the
Company means any Person that controls, is controlled by, or is under common
control with, the Company. A Person shall be deemed to be in control
of another Person if, and for so long as, it owns or controls more than 50% of
the voting power in the election of directors (or, in the case of an entity that
is not a corporation, for the election of the corresponding managing authority)
of such other Person.
(b) “
Cause
” means
Executive’s (i) conviction of, or plea of nolo contendere to, a felony or crime
involving moral turpitude; (ii) fraud on or misappropriation of any funds or
property of the Company; (iii) willful violation of any law, rule or regulation
(other than minor traffic violations or similar offenses or solely as a result
of vicarious liability) or breach of fiduciary duty which results in personal
profit to Executive. Executive shall be given notice of the
termination of Executive's employment for Cause and shall have an opportunity to
be heard by the Board with respect thereto and, to the extent that the Board
deems the matter curable, shall have a reasonable period of time to cure the
matter to the Board's reasonable satisfaction.
(c) “
Change in Control
Event
” means the occurrence of any of the following events with respect
to the Company:
(i) the consummation of any
consolidation or merger of the Company in which the holders of the Company's
common stock, par value $0.01 per share ("
Common Stock
")
immediately prior to such consolidation or merger own less than fifty percent
(50%) of the outstanding common stock of the surviving corporation immediately
after the merger; or
(ii) the
consummation of any sale, lease, exchange or other transfer (in one transaction
or a series of related transactions) of all, or substantially all, of the assets
of the Company, other than to a subsidiary or Affiliate; or
(iii) any
action pursuant to which any person or group (as such terms are defined in
Section 13(d) of the Securities Exchange Act of 1934, as amended (the "
Exchange Act
"), shall
become the “beneficial owner” (as such term is defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of shares of capital stock entitled to
vote generally for the election of directors of the Company (“
Voting Securities
”)
representing more than thirty (30%) percent of the combined voting power of the
Company’s then outstanding Voting Securities (calculated as provided in Rule
13d-3(d) in the case of rights to acquire any such securities); or
(iv) the
individuals (x) who, as of the effective date of this Agreement, constitute the
Board (the “
Original
Directors
”) and (y) who thereafter are elected to the Board and whose
election, or nomination for election, to the Board was approved by a vote of a
majority of the Original Directors then still in office (such Directors being
called “
Additional
Original Directors
”) and (z) who thereafter are elected to the Board and
whose election or nomination for election to the Board was approved by a vote of
a majority of the Original Directors and Additional Original Directors then
still in office, cease for any reason to constitute a majority of the members of
the Board.
(d) "
Disability
" means
that Executive is incapable of performing his principal duties due to physical
or mental incapacity or impairment for 120 consecutive days, or for 180
non-consecutive days, during any 12 month period.
(e) “
Good Reason
” means
(i) a material reduction in Executive’s base salary as in effect from time to
time; (ii) a material reduction in Executive's authority, duties or
responsibilities; (iii) Executive’s principal office location being moved to a
location which is more than 25 miles from the principal office location at which
Executive performs services on the date this Agreement is executed or (iv) a
material breach by the Company of the agreement under which Executive provides
services to the Company; provided, however, that Executive must notify the
Company, within 90 days of the occurrence of any of the foregoing conditions,
that he considers it to be a "Good Reason" condition, and provide the Company
with at least 30 days in which to cure the condition. In addition,
the resignation may not occur later than 6 months after the occurrence of the
condition giving rise to the resignation. If Executive fails to
provide such notice and cure period prior to his resignation, or his resignation
occurs later than 6 months after the initial occurrence of the condition, his
resignation shall not be deemed to be for "Good Reason" and Executive shall be
deemed to have waived any right to receive any of the payments or benefits set
forth in Section 2 hereof.
(f) “
Person
” means an
individual, a partnership, a limited liability company, a corporation, an
association, a joint stock corporation, a trust, a joint venture, an
unincorporated organization, or any court, administrative agency or commission
or other federal, state, county, local or foreign governmental authority,
instrumentality, agency or commission.
(g) “
Release
” means a
general release agreement in the form annexed hereto as
Exhibit A
and made a
part hereof.
(h) “
Trigger Event
” means
the occurrence of either: (i) the termination of Executive’s employment by the
Company other than a termination for Cause; or (ii) Executive’s resignation for
Good Reason within 6 months following a Change in Control Event. For
purposes of clarity, a termination of Executive's employment due to his death or
Disability shall not be considered a termination of Executive's employment by
the Company other than for Cause, and shall not constitute a Trigger
Event.
2.
Trigger Event Payments and
Benefits
.
Within 45 days after the occurrence of
a Trigger Event (or such shorter period as may be required by the Release),
Executive shall execute and deliver to the Company the Release. Upon
the sooner of the expiration of any applicable revocation period required for
the Release to be effective with respect to age discrimination claims and the
date on which it is otherwise permitted to be effective and irrevocable under
applicable law (such sooner date the “
Release Effective
Date
”), Executive shall be entitled to:
(a) cash
payments (collectively the "
Severance Payment
")
at the rate of Executive’s annual base salary as in effect immediately prior to
the Trigger Event for a period of 12 months (the "
Severance Period
"),
payable as set forth below. The Severance Payment shall be made as a
series of separate payments in accordance with the Company's standard payroll
practices (and subject to all applicable tax withholdings and deductions),
commencing with the first regular payroll date on or immediately following the
60th day after the date of the Trigger Event.
(b) if
Executive timely elects "COBRA" coverage and provided Executive continues to
make contributions for such continuation coverage equal to Executive’s
contribution amount in effect immediately preceding the date of Executive’s
termination of employment, the Company shall waive the remaining portion of
Executive’s healthcare continuation payments under COBRA for the Severance
Period. Notwithstanding the foregoing, in the event that Executive
becomes eligible to obtain alternate healthcare coverage from a new employer
before the end of the Severance Period, the Company’s obligation to waive the
remaining portion of Executive’s healthcare continuation coverage under COBRA
shall cease. Executive understands and affirms that Executive is
obligated to inform the Company if Executive becomes eligible to obtain
alternate healthcare coverage from a new employer before the end of the
Severance Period.
(c) Executive's
previously granted Company stock options and restricted stock ("
Retention Shares
”)
shall (to the extent not already then "vested"), partially "vest" and a portion
of the stock options shall be exercisable, in each case on a pro-rated basis,
taking into account the number of months elapsed since the date of grant as
compared to the scheduled vesting date. For example, if the total
number of months from the grant date until the vesting date is 36 months, and
the Trigger Event occurs at the end of the 12th month after the grant date, then
effective on the Release Effective Date, the total number of vested options and
vested Retention Shares should be equal to 1/3 (
i.e.,
12/36
)
of the total number of each
granted. Notwithstanding anything to the contrary contained herein,
the terms of the I.D. Systems, Inc. 2007 Equity Compensation Plan (the “
Plan
”) shall govern
acceleration of vesting of stock options and restricted stock in the event of a
“Change of Control” as defined in the Plan.
(d) The
“
Performance
Shares
” subject to the Restricted Stock Unit Award Agreement between
Executive and the Company dated as of June 29, 2009 shall be awarded in an
amount and to the extent of the sum of the “Interim Shares” determined (and
defined) in accordance with
Exhibit A
to that
agreement. For example, if a Trigger Event occurs on May 1, 2010, and
the Administrator (as defined in the Plan) has determined that the Stock Price
Target of a stock price of $7.50 has been met with respect to the fiscal year
ended December 31, 2009, then the number of Performance Shares that shall be
awarded upon the Trigger Event (effective on the Release Effective Date) shall
be the number equal to 1/3 of the number of Performance Shares listed in the
table (contained in the Restricted Stock Unit Award Agreement) corresponding to
a stock price of $7.50.
3.
Covenants
Agreement
. As a condition to the Company's obligations
hereunder, Executive shall execute and deliver to the Company an agreement in
the form of
Exhibit
B
annexed hereto and made a part hereof relating to confidentiality,
assignment of inventions, non-competition and non-solicitation. The
non-competition and non-solicitation covenants shall apply for a period equal to
the Severance Period.
4.
At Will
Employment
. Nothing in this Agreement shall alter Executive’s
status as an “at-will” employee.
5.
Headings
. Headings
used in this Agreement are for convenience of reference only and do not affect
the meaning of any provision.
6.
Counterparts
. This
Agreement may be executed as of the same effective date in one or more
counterparts, each of which shall be deemed an original.
7.
Binding Agreement;
Assignment
. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns.
8.
Governing Law;
Jurisdiction
. This Agreement and any and all matters arising
directly or indirectly herefrom shall be governed by, and construed in
accordance with, the internal laws of the State of New Jersey, without reference
to the choice of law principles thereof. Any legal action, suit or
other proceeding arising out of or in any way connected with this Agreement
shall be brought in the courts of the State of New Jersey, or in the United
States courts for the District of New Jersey. With respect to any
such proceeding in any such court: (i) each party generally and unconditionally
submits itself and its property to the exclusive jurisdiction of such court (and
corresponding appellate courts therefrom), and (ii) each party waives, to the
fullest extent permitted by law, any objection it has or hereafter may have the
venue of such proceeding as well as any claim that it has or may have that such
proceeding is in an inconvenient forum.
9.
Amendments
. This
Agreement may only be amended or otherwise modified, and the provisions hereof
may only be waived, by a writing executed by the parties hereto.
10.
Entire
Agreement
. This Agreement shall constitute the entire
agreement of the parties with respect to the matters covered hereby and shall
supersede all previous written, oral or implied understandings between them with
respect to such matters.
11.
Opportunity to Consult
Counsel
. Executive hereby acknowledges that he has read and
fully understands this Agreement, that he has been advised that Lowenstein
Sandler
PC
is counsel to
the Company and not to Executive, and that Executive has been advised to, and
has had the opportunity to, consult with counsel and Executive’s personal
financial or tax advisor with respect to this Agreement.
12.
No Effect on Other
Benefits
. Notwithstanding anything contained herein to the
contrary, nothing contained herein shall adversely affect the rights of
Executive and his dependents and beneficiaries to any and all benefits to which
any of them may be entitled under the benefit plans and arrangements of the
Company in accordance with the terms of such benefit plans and
arrangements.
13.
Section
409A
.
(a) This
Agreement is intended to comply with the requirements of Section 409A of the
Code and regulations promulgated thereunder (“
Section
409A
”). To the extent that any provision in this Agreement is
ambiguous as to its compliance with Section 409A, the provision shall be read in
such a manner so that no payments due under this Agreement shall be subject to
an "additional tax" as defined in Section 409A(a)(1)(B) of the
Code. For purposes of Section 409A, each payment made under this
Agreement shall be treated as a separate payment. In no event may
Executive, directly or indirectly, designate the calendar year of
payment.
(b) Notwithstanding
anything to the contrary contained herein, if necessary to comply with the
restriction in Section 409A(a)(2)(B) of the Code concerning payments to
“specified employees,” any payment on account of Executive’s separation from
service that would otherwise be due hereunder within six months after such
separation shall nonetheless be delayed until the first business day of the
seventh month following Executive’s date of termination and the first such
payment shall include the cumulative amount of any payments that would have been
paid prior to such date if not for such restriction, together with interest on
such cumulative amount during the period of such restriction at a rate, per
annum, equal to the applicable federal short-term rate (compounded monthly) in
effect under Section 1274(d) of the Code on the date of
termination. For purposes of Section 2 hereof, Executive shall be a
“specified employee” for the 12-month period beginning on the first day of the
fourth month following each “Identification Date” if he is a “key employee” (as
defined in Section 416(i) of the Code without regard to Section 416(i)(5)
thereof) of the Company at any time during the 12-month period ending on the
“Identification Date.” For purposes of the foregoing, the
Identification Date shall be December 31. Notwithstanding anything
contained herein to the contrary, Executive shall not be considered to have
terminated employment with the Company for purposes of Section 2 hereof unless
he would be considered to have incurred a “termination of employment” from the
Company within the meaning of Treasury Regulation
§1.409A-1(h)(1)(ii).
(c) Executive
acknowledges that any tax liability incurred by Executive under Section 409A of
the Code is solely the responsibility of Executive.
14.
No
Mitigation
. Executive shall be under no obligation to seek
other employment after Executive's termination of employment with the Company,
and the obligations of the Company to Executive which arise pursuant to Section
2 of this Agreement shall not be subject to mitigation or offset.
IN WITNESS WHEREOF, the parties hereto
have executed this Agreement as of the date first written above.
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I.D.
SYSTEMS, INC.
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By:
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/s/ Ned Mavrommatis
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Name: Ned
Mavrommatis
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Title: CFO
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Date: 9/22/09
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WITNESS:
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EXECUTIVE:
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/s/ Ken Ehrman
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/s/ Michael Ehrman
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Name: Ken
Ehrman
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Name: Michael
Ehrman
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Date: 9/22/09
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Date: 9/22/09
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EXHIBIT
A
FORM
OF RELEASE
SEPARATION AND GENERAL
RELEASE AGREEMENT
This Separation and General Release
Agreement (the "
Agreement
") is
entered into between _______________ with an address at
_____________________________ (the “
Employee
") and I.D.
Systems, Inc. ("
ID
Systems
"), together with its parent, divisions, affiliates, and
subsidiaries and their respective officers, directors, employees, shareholders,
members, partners, plan administrators, attorneys, and agents, as well as any
predecessors, future successors or assigns or estates of any of the foregoing
with an address at One University Plaza, 6
th
Floor,
Hackensack, New Jersey 07601 (the “
Released
Parties
”).
1.
Separation of
Employment
. Employee acknowledges and understands that
Employee’s last day of employment with ID Systems was _______________ (the
“
Separation
Date
”). Employee acknowledges and agrees that, except as
otherwise provided in this Agreement, Employee has received all compensation and
benefits to which Employee is entitled as a result of Employee’s
employment. Employee understands that, except as otherwise provided
in this Agreement, Employee is entitled to nothing further from any of the
Released Parties, including reinstatement by ID Systems.
2.
Employee General Release of
Released Parties
. In consideration of the payments and
benefits set forth in Section 4 below, Employee hereby unconditionally and
irrevocably releases, waives, discharges, and gives up, to the full extent
permitted by law, any and all Claims (as defined below) that Employee may have
against any of the Released Parties, arising on or prior to the date of
Employee’s execution and delivery of this Agreement to ID
Systems. “
Claims
” means any and
all actions, charges, controversies, demands, causes of action, suits, rights,
and/or claims whatsoever for debts, sums of money, wages, salary, severance pay,
commissions, bonuses, unvested stock options, vacation pay, sick pay, fees and
costs, attorneys fees, losses, penalties, damages, including damages for pain
and suffering and emotional harm, arising, directly or indirectly, out of any
promise, agreement, offer letter, contract, understanding, common law, tort, the
laws, statutes, and/or regulations of the State of New Jersey or any other state
and the United States, including, but not limited to, federal and state
whistleblower laws, Title VII of the Civil Rights Act of 1964, the Civil Rights
Act of 1991, the Equal Pay Act, the Americans with Disabilities Act, the Family
and Medical Leave Act, the Employment Retirement Income Security Act (excluding
COBRA), the Vietnam Era Veterans Readjustment Assistance Act, the Fair Credit
Reporting Act, the Age Discrimination in Employment Act (“
ADEA
”), the Older
Workers’ Benefit Protection Act, the Occupational Safety and Health Act, the
Sarbanes-Oxley Act of 2002, the New Jersey Law Against Discrimination, the New
Jersey Family Leave Act, the New Jersey Civil Rights Act, and the New Jersey
Conscientious Employee Protection Act, as each may be amended from time to time,
whether arising directly or indirectly from any act or omission, whether
intentional or unintentional. This Section 2 releases all
Claims including those of which Employee is not aware and those not mentioned in
this Agreement. Employee specifically releases any and all Claims
arising out of Employee’s employment with ID Systems or separation
therefrom. Employee expressly acknowledges and agrees that, by
entering into this Agreement, Employee is releasing and waiving any and all
Claims, including, without limitation, Claims that Employee may having arising
under ADEA, which have arisen on or before the date of Employee’s execution and
delivery of this Agreement to ID Systems.
3.
Representations; Covenant
Not to Sue
. Employee hereby represents and warrants to the
Released Parties that Employee has not: (A) filed, caused or permitted to be
filed any pending proceeding (nor has Employee lodged a complaint with any
governmental or quasi-governmental authority) against any of the Released
Parties, nor has Employee agreed to do any of the foregoing; (B) assigned,
transferred, sold, encumbered, pledged, hypothecated, mortgaged, distributed, or
otherwise disposed of or conveyed to any third party any right or Claim against
any of the Released Parties that has been released in this Agreement; or (C)
directly or indirectly assisted any third party in filing, causing or assisting
to be filed, any Claim against any of the Released Parties. Except as
set forth in Section 11 below, Employee covenants and agrees that he shall not
encourage or solicit or voluntarily assist or participate in any way in the
filing, reporting or prosecution by herself or any third party of a proceeding
or Claim against any of the Released Parties.
4.
Payment
. As
good consideration for Employee’s execution, delivery, and non-revocation of
this Agreement, ID Systems shall provide Employee with the payments and benefits
set forth in Section 2 of the Severance Agreement between Employee and ID
Systems dated as of June 29, 2009, payable as set forth
therein. Employee acknowledges that Employee is not otherwise
entitled to receive the payments and benefits described in this Section 4 and
acknowledges that nothing in this Agreement shall be deemed to be an admission
of liability on the part of any of the Released Parties. Employee
agrees that Employee will not seek anything further from any of the Released
Parties.
5.
Who is
Bound
. ID Systems and Employee are bound by this
Agreement. Anyone who succeeds to Employee’s rights and
responsibilities, such as the executors of Employee’s estate, is bound, and
anyone who succeeds to ID Systems’s rights and responsibilities, such as its
successors and assigns, is also bound.
6.
Cooperation.
Employee agrees that, within five business days of the Separation Date, he shall
provide ID Systems (attention: _________) with a written comprehensive summary
of all outstanding work activities, current and prospective customer contact
information, and otherwise reasonably cooperate as necessary to effect a
transition of his responsibilities. Employee also agrees that he will
cease from communicating with any current ID Systems employees (with the
exception of __________________) regarding ID Systems personnel or other
business-related matters. Employee agrees to reasonably cooperate in
any ID Systems investigations and/or litigation regarding events that occurred
during Employee’s tenure with ID Systems. ID Systems will compensate
Employee for reasonable expenses Employee incurs in extending such cooperation
regarding investigations and/or litigation, so long as Employee provides advance
written notice of Employee’s request for compensation.
7.
Non Disparagement and
Confidentiality
. Employee agrees not to make any defamatory or
derogatory statements concerning any of the Released
Parties. Provided inquiries are directed to ID Systems’ Department of
Human Resources, ID Systems shall disclose to prospective employers information
limited to Employee’s dates of employment and last position held by
Employee. Employee confirms and agrees that Employee shall not,
directly or indirectly, disclose to any person or entity or use for Employee’s
own benefit, any confidential information concerning the business, finances or
operations of ID Systems or its customers; provided, however, that Employee’s
obligations under this Section 7 shall not apply to information generally known
in ID Systems’ industry through no fault of Employee or the disclosure of which
is required by law after reasonable notice has been provided to ID Systems
sufficient to enable ID Systems to contest the
disclosure. Confidential information shall include, without
limitation, trade secrets, customer lists, details of contracts, pricing
policies, operational materials, marketing plans or strategies, security and
safety plans and strategies, project development, and any other non-public or
confidential information of, or relating to, ID Systems or its
affiliates. Employee also agrees that the amounts paid to Employee
and all of the other terms of this Agreement shall be kept confidential, unless
ID Systems discloses them in a public filing. Employee acknowledges
that he continues to be bound by the Confidentiality, Assignment of
Contributions and Inventions, Non-Competition and Non-Solicitation Agreement
(the “
Covenants
Agreement
”).
8.
Remedies
. If
Employee tells anyone the amount paid to Employee or any other term of this
Agreement (unless ID Systems has publicly disclosed the terms of this Agreement
in a public filing), breaches any other term or condition of this Agreement or
the Covenants Agreement, or any representation made by Employee in this
Agreement was false when made, it shall constitute a material breach of this
Agreement and, in addition to and not instead of the Released Parties’ other
remedies hereunder, under the Covenants Agreement or otherwise at law or in
equity, Employee shall be required to immediately, upon written notice from ID
Systems, return the payments paid by ID Systems hereunder, less
$500. Employee agrees that if Employee is required to return the
payments, this Agreement shall continue to be binding on Employee and the
Released Parties shall be entitled to enforce the provisions of this Agreement
as if the payments had not been repaid to ID Systems and ID Systems shall have
no further payment obligations to Employee hereunder. Further, in the
event of a material breach of this Agreement, Employee agrees to pay all of the
Released Parties’ attorneys’ fees and other costs associated with enforcing this
Agreement.
9.
ID Systems
Property
. Employee represents that he has returned all ID
Systems property in Employee’s possession, custody or control, including, but
not limited to, all ID Systems equipment, samples, laptop computers, personal
digital assistants, cell phones, pass codes, keys, swipe cards, documents or
other materials that Employee received, prepared, or helped
prepare. Employee represents that Employee has not retained any
copies, duplicates, reproductions, computer disks, or excerpts thereof of ID
Systems’ documents.
10.
Construction of
Agreement
. In the event that one or more of the provisions
contained in this Agreement shall for any reason be held unenforceable in any
respect under the law of any state of the United States or the United States,
such unenforceability shall not affect any other provision of this Agreement,
but this Agreement shall then be construed as if such unenforceable provision or
provisions had never been contained herein or therein. If it is ever
held that any restriction hereunder is too broad to permit enforcement of such
restriction to its fullest extent, such restriction shall be enforced to the
maximum extent permitted by applicable law. This Agreement and any
and all matters arising directly or indirectly herefrom or therefrom shall be
governed under the laws of the State of New Jersey, without reference to choice
of law rules. ID Systems and Employee consent to the sole
jurisdiction of the federal and state courts of New Jersey.
ID SYSTEMS AND EMPLOYEE HEREBY WAIVE
THEIR RESPECTIVE RIGHT TO TRIAL BY JURY IN ANY ACTION CONCERNING THIS AGREEMENT
OR ANY AND ALL MATTERS ARISING DIRECTLY OR INDIRECTLY HEREFROM AND REPRESENT
THAT THEY HAVE CONSULTED WITH COUNSEL OF THEIR CHOICE OR HAVE CHOSEN VOLUNTARILY
NOT TO DO SO SPECIFICALLY WITH RESPECT TO THIS WAIVER.
11.
Acknowledgments
. ID
Systems and Employee acknowledge and agree that:
(A) By entering into this
Agreement, Employee does not waive any rights or Claims that may arise after the
date that Employee executes and delivers this Agreement to ID
Systems;
(B) This
Agreement shall not affect the rights and responsibilities of the Equal
Employment Opportunity Commission (the “
EEOC
”) to enforce the
ADEA and other laws, and further acknowledge and agree that this Agreement shall
not be used to justify interfering with Employee’s protected right to file a
charge or participate in an investigation or proceeding conducted by the
EEOC. Accordingly, nothing in this Agreement shall preclude Employee
from filing a charge with, or participating in any manner in an investigation,
hearing or proceeding conducted by, the EEOC, but Employee hereby waives any and
all rights to recover under, or by virtue of, any such investigation, hearing or
proceeding;
(C) Notwithstanding anything
set forth in this Agreement to the contrary, nothing in this Agreement shall
affect or be used to interfere with Employee’s protected right to test in any
court, under the Older Workers’ Benefit Protection Act, or like statute or
regulation, the validity of the waiver of rights under ADEA set forth in this
Agreement; and
(D) Nothing in this
Agreement shall preclude Employee from: exercising Employee’s rights, if any (i)
under Section 601-608 of the Employee Retirement Income Security Act of 1974, as
amended, popularly known as COBRA, or (ii)
ID Systems’s pension
plan or 401(k) plan, if applicable.
12.
Opportunity For
Review
.
(A) Employee
represents and warrants that Employee: (i) has had sufficient opportunity to
consider this Agreement; (ii) has read this Agreement; (iii) understands all the
terms and conditions hereof; (iv) is not incompetent or had a guardian,
conservator or trustee appointed for Employee; (v) has entered into this
Agreement of Employee’s own free will and volition; (vi) has duly executed and
delivered this Agreement; (vii) understands that Employee is responsible for
Employee’s own attorney’s fees and costs; (viii) has had the opportunity to
review this Agreement with counsel of Employee’s choice or has chosen
voluntarily not to do so; (ix) understands the Employee has been given
twenty-one (21) days to review this Agreement before signing this Agreement and
understands that he is free to use as much or as little of the 21-day period as
he wishes or considers necessary before deciding to sign this Agreement; (x)
understands that if Employee does not sign and return this Agreement to ID
Systems within 21 days of his receipt, ID Systems shall have no obligation to
enter into this Agreement, Employee shall not be entitled to the payments and
benefits set forth in Section 4 of this Agreement, and the Separation Date shall
be unaltered; and (xi) this Agreement is valid, binding and enforceable against
the parties to this Agreement in accordance with its terms.
(B) This
Agreement shall be effective and enforceable on the eighth (8
th
) day
after execution and delivery to ID Systems by Employee. The parties
to this Agreement understand and agree that Employee may revoke this Agreement
after having executed and delivered it to ID Systems by so advising ID Systems
in writing no later than 11:59 p.m. on the seventh (7
th
) day
after Employee’s execution and delivery of this Agreement to ID
Systems. If Employee revokes this Agreement, it shall not be
effective or enforceable, Employee shall not be entitled to the payments and
benefits set forth in Section 4 of this Agreement, and the Separation Date shall
be unaltered.
Agreed
to and accepted on this ____ day of ________, 20__.
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Witness:
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EMPLOYEE:
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Name:
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Agreed
to and accepted on this ____ day of ________, 20__.
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ID
SYSTEMS, INC.
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Name:
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Title:
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EXHIBIT
B
FORM
OF COVENANTS AGREEMENT
I.D.
SYSTEMS, INC.
Confidentiality,
Assignment of Contributions and
Inventions,
Non-Competition, and Non-Solicitation Agreement
Background
. I
am a paid employee of I.D. Systems, Inc., a Delaware corporation (the “
Company
”). I
am executing this Agreement in consideration of my continued
employment with the
Company and the severance agreement effective as of June 29, 2009, the
restricted stock award granted pursuant to the restricted stock award agreement
dated as of June 29, 2009, the restricted stock unit award granted pursuant to
the restricted stock unit award agreement dated as of June 29, 2009 and the
stock option grant pursuant to the stock option grant agreement with a grant
date of June 29, 2009.
1.
Confidentiality
. While
working for the Company, I may have previously developed or acquired, or may in
the future develop or acquire, knowledge in my work or from my colleagues or
otherwise of Confidential Information relating to the Company, its business,
potential business or that of its customers
or its or their
respective affiliates. “
Confidential
Information
” includes information concerning the identity of customers or
their requirements or key contacts within the customer’s organization,
suppliers, distributors, software programs, demonstration programs, routines,
algorithms, computer systems, plans, strategies, research, formulations,
processes, production methods and sources, products and specifications,
equipment manufacturing and other techniques, designs, know-how, show how, trade
secrets, inventions, improvements, discoveries, concepts, methodology, formulas,
drawings, maps, manuals, models, specifications, records, files, memoranda,
notes, reports, files, correspondence, financial and sales data, pricing lists
or terms, trading terms, training materials and methods, marketing,
distribution, and merchandising techniques and strategies, evaluations, opinions
and interpretations, together with all other writings or materials of any type
embodying any of the foregoing and any and all other technical, operating,
financial, and business information or materials relating to the Company, its
customers
or its or
their respective affiliates, whether or not reduced to writing or other medium
and whether or not marked or labeled confidential, proprietary, or the like,
regardless of whether created by me, others or both. Confidential
Information does not include information that is or becomes public domain
without fault on my part. I will have the burden of proof with
respect to the exclusion of any information from the definition of “Confidential
Information.”
With respect to Confidential
Information of the Company, its customers and its or their respective
affiliates, I agree that:
(a) The Confidential
Information is and will continue to be the sole and exclusive property of the
Company;
(b) Except as required under
applicable law or pursuant to any judicial process or administrative proceeding
with subpoena powers, I will use the Confidential Information only in the
performance of my duties for the Company. I will not use the
Confidential Information at any time (during or after my employment with the
Company or any of its affiliates) for my personal benefit, for the benefit of
any other Person or in any manner adverse to the interests of the Company, its
customers or its or their respective affiliates;
(c) Except as required under
applicable law or pursuant to any judicial process or administrative proceeding
with subpoena powers, I will not disclose the Confidential Information at any
time (during or after my employment with the Company or any of its affiliates)
except to authorized Company personnel, unless the Company consents in advance
in writing or unless the Confidential Information indisputably becomes of public
knowledge or enters the public domain (without fault on my part);
(d) I will safeguard the
Confidential Information by all reasonable steps and abide by all policies and
procedures of the Company and its customers in effect from time to time
regarding storage, copying, destroying, publication or posting, or handling of
such Confidential Information, in whatever medium or format that Confidential
Information takes;
(e) Except as required under
applicable law or pursuant to any judicial process or administrative proceeding
with subpoena powers, I will execute and abide by all confidentiality agreements
that the Company reasonably requests me to sign or abide by, whether those
agreements are for the benefit of the Company, an affiliate or an actual or a
potential customer or supplier thereof;
(f) I will return all
materials containing or relating to Confidential Information, together with all
other Company or customer property, to the Company when my employment with the
Company or any of its affiliates terminates (either voluntary or involuntary) or
upon the Company’s earlier request. I shall not retain any copies or
reproductions of correspondence, memoranda, reports, notebooks, drawings,
photographs, or other documents relating in any way to the business or affairs
of the Company, its customers or its or their respective affiliates;
and
(g) Upon any termination of
my employment with the Company, I will acknowledge to the Company, in writing
and under oath, in the form attached hereto as
Exhibit
A
that I have
complied with this Agreement.
As used herein, the term “
Person
” means an
individual, a partnership, a corporation, a limited liability company, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization or a governmental entity or department, agency or subdivision of
the government entity.
For purposes of clauses (b), (c) and
(e), in the event of any required disclosure, I will promptly notify the Company
and reasonably cooperate and assist the Company in resisting such disclosure in
the event it chooses to do so.
2.
Contributions
and Inventions
.
While employed by the Company, I may make Contributions and Inventions
deemed by the Company to have value to it. The terms “
Contributions
” and
“
Inventions
”
are understood to include all information, ideas, concepts, technology,
improvements, discoveries, formulae, inventions, creations, discoveries,
techniques, designs, methods, trade secrets, technical specifications and data,
works, modifications, processes, know-how, show-how, concepts, expressions,
improvements, works of authorship (including computer programs), ideas and other
developments, whether or not they are patentable or copyrightable or subject to
analogous protection and regardless of their form or state of development and
whether or not I have made them alone or with others, together with any and all
rights to U.S. or foreign applications for patents, inventor’s certifications or
other industrial rights that may be filed thereon, including divisions,
continuations-in-part, reissues and/or extensions thereof.
This Agreement covers Contributions and
Inventions of any kind that are conceived or made by me, alone or with others,
while I am employed by the Company, regardless of whether they are conceived or
made during regular working hours or at my place of work (whether located at the
Company, customer facilities, at home or elsewhere) and that (i) relate to the
Company’s business or potential business or that of its affiliates, (ii) result
from tasks assigned to me by the Company, or (iii) are conceived or made with
the use of the Company’s time, facilities, resources, or
materials. With respect to Contributions or Inventions covered by
this Agreement, I agree that:
(a) I will disclose them
promptly to the Company. I will not disclose them to anyone other
than authorized Company personnel;
(b) They will belong solely
to the Company from conception as “works made for hire” (as that term is used
under U.S. copyright law) or otherwise. To the extent that title to any such
Contributions and Inventions do not, by operation of law, vest in the Company, I
hereby irrevocably assign to the Company all right, title and interest,
including, without limitation, tangible and intangible rights such as patent
rights, trademarks, and copyrights, that I may have or may acquire in and to all
such Contributions and Inventions, benefits and/or rights resulting therefrom,
and agree to promptly execute any further specific assignments related to such
Contributions or Inventions, benefits and/or rights at the request of the
Company. If the Company wants more specific or formal evidence of
this, I will sign written documents of assignment at the Company’s
request. I also hereby assign to the Company, or waive if not
assignable, all “moral rights” in and to any Contributions and Inventions and
agree promptly to execute any further specific assignments or waivers related to
moral rights at the request of the Company; and
(c) I will, at any time,
either during the time I am employed by the Company or thereafter, assist the
Company in obtaining and maintaining patent, copyright, trademark, mask works
and other protection for them, in all countries and territories, at the
Company’s expense. In the event that the Company is unable to secure
my signature after reasonable effort in connection with any patent, trademark,
copyright, mask work or other similar protection relating to a Contribution or
an Invention, I hereby irrevocably designate and appoint the Company and its
duly authorized officers and agents as my agent and attorney-in-fact, to act for
and on my behalf and stead to execute and file any such application and to do
all other lawfully permitted acts to further the prosecution and issuance of
patents, trademarks, copyrights, mask works or other similar protection thereon
with the same legal force and effect as if executed by me.
(d) Any Contributions or
Inventions relating to the business of the Company and disclosed to the Company
within 6 months following the termination of my employment shall be deemed to
fall within the provisions of this Section 2. The “business of the
Company’ as used in this Section 2 includes the actual business conducted by the
Company or any of its affiliates at any time during my employment with the
Company, as well as any business in which the Company or any of its affiliates,
at any time during my employment with the Company, proposes or proposes to
engage.
3.
Obligations
to Prior Employers or Others
. I do not have any
non-disclosure, non-compete, non-solicitation or other obligations to any
previous employer or other Person that would prohibit, limit, conflict or
interfere with my obligations under this Agreement or the performance of my
duties for the Company. I will not disclose to the Company or its
customers or induce the Company or its customers to use any secret or
confidential information or material belonging to others, including my former
employers, if any.
4.
Excluded
Information
. A complete list, by non-confidential descriptive
title of all Contributions, Inventions, ideas, reports or other creative works,
if any, made or conceived by me prior to my employment by the Company and
intended to be excluded from this Agreement, is attached as
Exhibit
B
. I shall
not assert any rights under any Contributions, Inventions, ideas, reports or
other creative works as having been made or acquired by me prior to my being
employed by the Company, unless such Contributions, Inventions, ideas, reports
or other creative works are identified on
Exhibit
B
. If,
after the date of this Agreement, I believe that any Contribution or Invention
is excluded from this Agreement, I agree to obtain written authorization from
the Company, prior to applying for any patent on the Contribution or Invention,
and prior to taking any steps to commercially exploit the Contribution or
Invention.
5.
Covenant
Against Competition and Solicitation
.
(a) I acknowledge and
understand that, in view of my position as an employee of the Company, I may
have previously been afforded, or in the future may be afforded, access to the
Company’s Confidential Information and that of its affiliates. I
therefore agree that during the course of my employment with the Company or any
of its affiliates and for a period of 12 months after termination of my
employment with the Company and all of its affiliates (for any reason or no
reason) (the “
Restricted Period
”),
I will not, anywhere within the United States of America or any other country or
territory in which the Company or its affiliates conducts business, either
directly or indirectly, whether alone or as an employee, employer, consultant,
independent contractor, agent, principal, partner, joint venturer, stockholder,
member, officer, director or otherwise of any company or other business
enterprise, or in any other individual or representative capacity, engage in,
assist in, participate in, or otherwise be connected to or benefit from any
Competitive Business. As used in this Agreement, “
Competitive Business
”
shall mean any individual, entity, or business enterprise that is engaged in or
is seeking to engage in: (i) the development, design, manufacture, marketing,
sale and/or distribution of tracking and monitoring products; or (ii)
the development, design, manufacture, marketing, sale and/or distribution of any
products that are directly competitive with products that (a) represent at least
10% of the Company’s consolidated product revenues, (b) were first sold or
distributed by the Company or any of its affiliates during the preceding
12-month period, or (c) are being developed, produced, marketed and/or
distributed by the Company or any of its affiliates and are scheduled to be
first sold or distributed by the Company within a 12-month period; provided,
however, that for purposes of this definition, a business shall be a
“Competitive Business,” as it applies during the 12 month period after
termination of my employment only if the Company is engaged or is actively
seeking to engage in that business on the date of my termination of employment
with the Company or was engaged or actively seeking to engage in that business
at any time during the preceding 12 months.
(b) During the Restricted
Period, I will not, without the express prior written consent of the Company,
directly or indirectly: (i) solicit, induce, or assist any third
person in soliciting or inducing any Person that is (or was at any time within
the 12 months prior to the solicitation or inducement) an employee, consultant,
independent contractor or agent of the Company or any of its affiliates to leave
the employment of the Company or any of its affiliates or cease performing
services as an independent contractor, consultant or agent of the Company or any
of its affiliates; (ii) hire, engage, or assist any third party in hiring or
engaging, any individual that is or was (at any time within the 12 months prior
to the attempted hiring) an employee of the Company or any of its affiliates; or
(iii) contact, communicate, solicit, or transact any business with or assist any
third party in contacting, communicating, soliciting, or transacting any
business with any Person that is or was (at any time within 12 months prior to
the contact, communication, solicitation, or transaction) a customer,
distributor or supplier of the Company or its affiliates (or Person who, at any
time during the 12 months prior to the contact, communication, solicitation, or
transaction, the Company or its affiliates contacted, communicated with or
solicited for the purposes of becoming a customer, distributor, or supplier of
the Company or its affiliates and I was in any way involved or otherwise had
knowledge of or reasonably should have had knowledge of such contact,
communication, or solicitation) for the purposes of inducing such customer,
distributor, or supplier or potential customer, distributor, or supplier to be
connected to or benefit from any business competitive with that of the Company
or its affiliates or terminate its or their business relationship with the
Company or its affiliates.
6.
Non-Disparagement
. I
will not at any time (during or after my employment with the Company) disparage
the reputation of the Company, its affiliates, or any of its or their respective
officers and directors.
7.
Interpretation
and Scope of this Agreement
.
(a) In
the event that any court of competent jurisdiction shall determine that any one
or more of the provisions contained in this Agreement shall be unenforceable in
any respect, then such provision shall be deemed limited and restricted to the
extent that the court shall deem the provision to be enforceable. It
is the intention of the parties to this Agreement that the covenants and
restrictions in this Agreement be given the broadest interpretation permitted by
law. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
hereof. The covenants and restrictions contained in this Agreement
shall be deemed a series of separate covenants and restrictions. If,
in any judicial proceeding, a court of competent jurisdiction should refuse to
enforce all of the separate covenants and restrictions in this Agreement, then
such unenforceable covenants and restrictions shall be deemed eliminated from
the provisions of this Agreement for the purpose of such proceeding to the
extent necessary to permit the remaining separate covenants and restrictions to
be enforced in such proceeding.
(b) I
acknowledge that the restrictions on the activities in which I may engage that
are set forth in this Agreement and the location and period of time for which
such restrictions apply are reasonable and necessary to protect the legitimate
business interests of the Company and shall survive the termination of my
employment. I understand that the Company’s business is global and,
accordingly, the restrictions cannot be limited to any particular geographic
area. I further acknowledge that the restrictions contained in this
Agreement will not prevent me from earning a livelihood during the applicable
period of restriction.
(c) I
understand and agree that if I breach or threaten to breach any of the
provisions of this Agreement, including, without limitation, the provisions of
Sections 1, 2, 5 or 6 hereof, the Company would suffer irreparable harm and
damages would be an inadequate remedy. Accordingly, I acknowledge
that, in the event of any breach or threatened breach by me of any of the
provisions of this Agreement, the Company shall be entitled to temporary,
preliminary and permanent injunctive or other equitable relief in any court of
competent jurisdiction (without being required to post a bond or other
collateral) and to an equitable accounting of all earnings, profits and other
benefits arising, directly or indirectly, from such violation, which rights
shall be cumulative and in addition to (rather than instead of) any other rights
or remedies to which the Company may be entitled at law or in
equity. In addition (and not instead of those rights), I further
covenant that I shall be responsible for payment of the reasonable fees and
expenses of the Company’s attorneys and experts, as well as the Company’s court
costs, pertaining to any suit, arbitration, mediation, action or other
proceeding (including the costs of any investigation related thereto) in which
the Company prevails, arising directly or indirectly out of my violation or
threatened violation of any of the provisions of this Agreement. If
the Company does not prevail in any suit, arbitration, mediation, action or
other proceeding arising directly or indirectly out of my purported violation of
any of the provisions of this Agreement, the Company shall be responsible for
payment of the reasonable fees and expenses of attorneys and experts that I
incur, as well as my court costs, pertaining to any such suit, arbitration,
mediation, action or other proceeding (including the costs of any investigation
related thereto).
(d) This
Agreement shall be binding upon me, my heirs, assigns and personal
representatives and shall inure to the benefit of the Company, its affiliates
and their respective successors and assigns (including, without limitation, the
purchaser of all or substantially all of its assets).
(e) This
Agreement shall constitute the entire agreement between Company and myself with
respect to the matters covered hereby and shall supersede all previous written,
oral or implied understandings between us with respect to such
matters.
(f) I
acknowledge that my employment with the Company is “at-will.” I
understand that nothing contained in this Agreement shall give me a right to
continue in the employ of the Company, and the right to terminate my employment
with the Company, at any time, with or without cause, is specifically reserved
to the Company. I also understand that I may resign from employment
with the Company at any time in my discretion.
(g) Any
and all actions or controversies arising out of this Agreement, Employee’s
employment by the Company or termination therefrom, including, without
limitation, tort claims, shall be construed and enforced in accordance with the
internal laws of the State of New Jersey, without regard to the choice of law
principles thereof.
I represent and warrant
that: (a) I have read this Agreement; (b) I understand all the terms
and conditions hereof; (c) I have entered into this Agreement of my own free
will and volition; (d) I have been advised by the Company to seek and have, to
the extent I have deemed necessary, received the advice of counsel of any own
selection; and (e) the terms of this Agreement are fair, reasonable and are
being agreed to voluntarily in exchange for my continued employment with the
Company and the severance agreement effective as of June 29, 2009, the
restricted stock award granted pursuant to the restricted stock award agreement
dated as of June 29, 2009, the restricted stock unit award granted pursuant to
the restricted stock unit award agreement dated as of June 29, 2009 and the
stock option grant pursuant to the stock option grant agreement with a grant
date of June 29, 2009.
Date:
|
9/22/09
|
|
/s/
Michael Ehrman
|
|
|
|
Name: Michael
Ehrman
|
Accepted:
I.D.
SYSTEMS, INC.
|
|
|
By:
|
/s/
Ned Mavrommatis
|
EXHIBIT
A
STATE OF
NEW JERSEY
COUNTY OF
_________________
The undersigned, being duly sworn, does
hereby certify that he/she has complied with, and will continue to comply with,
for the applicable period set forth therein, all of the terms of the
Confidentiality, Assignment of Contributions and Inventions, Non Competition and
Non-Solicitation Agreement dated _______ __, 200_ by the Undersigned in favor of
I.D. Systems, Inc. (the “Company”). I have returned all Company
property and all materials relating to or containing Confidential Information to
the Company and I have not retained any copies or reproductions of any
correspondence, memoranda, reports, notebooks, drawings, photographs or other
documents or materials relating to the affairs of the Company, its customers and
its or their affiliates.
Sworn and
Subscribed to
before me
this ____ day of
______________,
______
EXHIBIT
B
Excluded
Information
(See
Section 4. If None, type “NONE”)
NONE
Exhibit
10.5
I.D.
SYSTEMS, INC.
2009
NON-EMPLOYEE DIRECTOR EQUITY COMPENSATION PLAN
1.
Purposes of the Plan.
The purposes of this I.D. Systems 2009 Non-Employee Director Equity Compensation
Plan are to attract qualified individuals for positions of responsibility as
outside directors of the Company, and to provide incentives for qualified
individuals to remain on the Board as outside directors.
2.
Definitions.
As used
herein, the following definitions shall apply:
“
Administrator
” means
the Board or a committee designated by the Board to administer this Plan and
consisting solely of members of the Board.
“
Applicable Laws
”
means the requirements relating to the administration of stock option plans
under U.S. state corporate laws, U.S. federal and state securities laws, the
Code, any stock exchange or quotation system on which the Common Stock is listed
or quoted and the applicable laws of any foreign country or jurisdiction where
Options are, or will be, granted under the Plan.
“
Board
” means the
Board of Directors of the Company.
“
Cause
” means removal
from the Board by means of a resolution that recites that the Participant is
being removed solely for Cause.
“
Change in Control
”
means the occurrence of any of the following events with respect to the
Company:
(A) the
consummation of any consolidation or merger of the Company in which the Company
is not the continuing or surviving corporation or pursuant to which Common Stock
would be converted into cash, securities or other property, other than a merger
of the Company in which the holders of Common Stock immediately prior to the
merger own more than fifty percent (50%) of the outstanding common stock of the
surviving corporation immediately after the merger; or
(B) the
consummation of any sale, lease, exchange or other transfer (in one transaction
or a series of related transactions) of all, or substantially all, of the assets
of the Company, other than to a subsidiary or affiliate; or
(C) any
action pursuant to which any person (as such term is defined in Section 13(d) of
the Exchange Act), corporation or other entity shall become the “beneficial
owner” (as such term is defined in Rule 13d-
3 under
the Exchange Act), directly or indirectly, of shares of capital stock entitled
to vote generally for the election of directors of the Company (“Voting
Securities”) representing more than fifty (50%) percent of the combined voting
power of the Company’s then outstanding Voting Securities (calculated as
provided in Rule 13d-3(d) in the case of rights to acquire any such securities);
or
(D) the
individuals (x) who, as of the Effective Date, constitute the Board (the
“Original Directors”) and (y) who thereafter are elected to the Board and whose
election, or nomination for election, to the Board was approved by a vote of a
majority of the Original Directors then still in office (such Directors being
called “Additional Original Directors”) and (z) who thereafter are elected to
the Board and whose election or nomination for election to the Board was
approved by a vote of a majority of the Original Directors and Additional
Original Directors then still in office, cease for any reason to constitute a
majority of the members of the Board.
“
Code
” means the
Internal Revenue Code of 1986, as amended.
“
Common Stock
” means
the common stock, par value $.01 per share, of the Company.
“
Company
” means I.D.
Systems, Inc., a Delaware corporation.
“
Director
” means a
member of the Board.
“
Disability
” means
permanent and total disability within the meaning of Section 22(e)(3) of the
Code.
“
Effective Date
” means
the date on which this Plan is approved by stockholders of the
Company.
“
Exchange Act
” means
the Securities Exchange Act of 1934, as amended.
“
Fair Market Value
”
means, as of any date, the value of Common Stock determined as
follows:
(i) if
the Common Stock is listed on any established stock exchange or a national
market system, including without limitation the Nasdaq Global Market or the
Nasdaq Capital Market of The Nasdaq Stock Market, the fair market value of a
share of Common Stock shall be the closing sales price of a share of Common
Stock as quoted on such exchange or system for such date (or the most recent
trading day preceding such date if there were no trades on such date), as
reported in
The Wall
Street Journal
or such other source as the Administrator deems
reliable;
(ii) if
the Common Stock is regularly quoted by a recognized securities dealer but is
not listed in the manner contemplated by clause (i) above, the Fair Market Value
of a share of Common Stock shall be the mean between the high bid and low asked
prices for the Common Stock on the last market trading day prior to the day of
determination, as reported in The Wall Street Journal or such other source as
the Administrator deems reliable; or
(iii) if
neither clause (i) above nor clause (ii) above applies, the Fair Market Value of
a share of Common Stock shall be determined in good faith by the Administrator
based on the reasonable application of a reasonable valuation
method.
“
Option
” means a stock
option granted pursuant to the Plan.
“
Option Agreement
”
means an agreement between the Company and an Optionee evidencing the terms and
conditions of an individual Option grant. The Option Agreement is subject to the
terms and conditions of the Plan.
“
Optionee
” means the
holder of an outstanding Option granted under the Plan.
“
Outside Director
”
means any Director who, on the date such person is to receive a grant of an
Option or Restricted Shares hereunder is not an employee of the Company or any
of the Company’s subsidiaries.
“
Participant
” shall
mean any Outside Director who holds an Option or a Restricted Stock Award
granted or issued pursuant to the Plan.
“
Plan
” means this I.D.
Systems, Inc. 2009 Non-Employee Director Equity Compensation Plan.
“
Restricted Stock
Award
” means a grant of Restricted Shares pursuant to Section 7 of the
Plan.
“
Restricted Stock
Agreement
” means an agreement, approved by the Administrator, evidencing
the terms and conditions of a Restricted Stock Award.
“
Restricted Shares
”
means Shares subject to a Restricted Stock Award.
“
Share
” means a share
of Common Stock, as adjusted in accordance with Section 12 of the
Plan.
3.
Stock Subject to the
Plan.
Subject to the provisions of Section 12 of the Plan, the maximum
aggregate number of Shares that may be issued upon exercise of Options and/or as
Restricted Shares under the Plan is Three Hundred Thousand (300,000) Shares. The
Shares may be authorized, but unissued, or reacquired Common Stock. If an Option
expires or becomes unexercisable without having been exercised in full, the
unpurchased Shares that were subject thereto shall become available for future
grant or sale under the Plan (unless the Plan has terminated);
provided
,
however
, that Shares
that have actually been issued under the Plan upon exercise of an Option shall
not be returned to the Plan and shall not become available for future
distribution under the Plan. Restricted Shares that have been transferred back
to the Company shall also be available for future grants of Options or
Restricted Shares under the Plan.
4.
Administration of the
Plan.
(a)
Administration
. The
Plan shall be administered by the Administrator. The Administrator shall have
the authority, in its discretion:
(i) to
determine the Fair Market Value of Common Stock;
(ii) to
approve forms of agreement for use under the Plan;
(iii) to
determine the number of Options to be granted to any Outside Director and the
exercise price and other terms and conditions of Options;
(iv) to
determine the number of Restricted Shares to be granted to any Outside Director
and the terms and conditions of Restricted Stock Awards;
(v) to
construe and interpret the terms of the Plan;
(vi) to
prescribe, amend and rescind rules and regulations relating to the
Plan;
(vii) to
allow Participants to satisfy withholding tax obligations by having the Company
withhold from the shares of Common Stock to be issued upon exercise of an Option
or upon vesting of Restricted Shares that number of Shares having a Fair Market
Value equal to the amount required to be withheld, provided that withholding is
calculated at the minimum statutory withholding level. The Fair Market Value of
the Shares to be withheld shall be determined on the date that the amount of tax
to be withheld is to be determined. All determinations to have Shares withheld
for this purpose shall be made by the Administrator in its
discretion;
(viii) to
authorize any person to execute on behalf of the Company any instrument required
to effect the grant of an Option or Restricted Stock Award granted by the
Administrator; and
(ix) to
make all other determinations deemed necessary or advisable for administering
the Plan.
(b)
Effect of Administrator’s
Decision
. The Administrator’s decisions, determinations and
interpretations shall be final and binding on all Participants and anyone else
who may claim an interest in Options or Restricted Shares.
5.
Eligibility.
The only
persons who shall be eligible to receive Options and/or Restricted Stock Awards
under the Plan shall be persons who, on the date such Options or Awards are
granted, are Outside Directors.
6.
Term of the Plan.
No
Option or Restricted Stock Award may be granted under the Plan more than ten
(10) years after the Effective Date.
7.
Grants of Restricted Stock
Awards.
Subject to Section 3 hereof, the Administrator may grant
Restricted Shares to Participants in such numbers and at such times as the
Administrator determines to be appropriate.
8.
Terms of Restricted Stock
Awards.
Except as provided herein, Restricted Shares shall be subject to
restrictions (“
Restrictions
”)
prohibiting such Restricted Shares from being sold, transferred, assigned,
pledged or otherwise encumbered or disposed of. The Administrator shall
determine the terms and conditions under which the Restrictions with respect to
each award of Restricted Shares shall lapse;
provided
,
however
, that except
as provided below, the Restrictions with respect to each award of Restricted
Shares shall not lapse with respect to more than 20% of the Restricted Shares
that are the subject of a particular award during any 12 month period commencing
from the date of grant of such award. Notwithstanding the foregoing, the
Restrictions with respect to a Participant’s Restricted Shares shall lapse
immediately in the event that (i) the Participant is removed from service as a
Director (other than for Cause) before his or her term has expired (and does not
continue as, or become, an employee of the Company or a subsidiary of the
Company), (ii) the Participant is nominated for a new term as an Outside
Director but is not elected by stockholders of the Company, (iii) the
Participant ceases to be a member of the Board due to death, disability or
mandatory retirement (if any), or (iv) if the Participant ceases to continue as
a member of the Board or of the board of directors of a successor company
following a Change in Control.
The
Company shall issue, in the name of each Participant to whom Restricted Shares
have been granted, stock certificates representing the total number of
Restricted Shares granted to such Participant as soon as reasonably practicable
after the grant. However, the Company shall hold such certificates, properly
endorsed for transfer, for the Participant’s benefit until such time as the
Restriction Period applicable to such Restricted Shares lapses. Upon the
expiration or termination of the Restricted Period, the restrictions applicable
to the Restricted Shares shall lapse and a stock certificate for the number of
Restricted Shares with respect to which the restrictions have lapsed shall be
delivered, free of all such restrictions, to the Participant or his or her
beneficiary or estate, as the case may be. In the event that a Participant
ceases to be a member of the Board before the applicable Restriction Period has
expired or under circumstances in which the Restriction Period does not
otherwise lapse, the Restricted Shares granted to such Participant shall
thereupon be forfeited and transferred back to the Company.
During
the Restriction Period, a Participant shall have the right to vote his or her
Restricted Shares and shall have the right to receive any cash dividends with
respect to such Restricted Shares. All distributions, if any, received by a
Participant with respect to Restricted Shares as a result of any stock split,
stock distribution, combination of shares, or other similar transaction shall be
subject to the same restrictions as are applicable to the Restricted Shares to
which such distributions relate.
9.
Grants of Options.
Subject to Section 3 hereof, the Administrator may grant Options to Participants
in such numbers and at such times as the Administrator determines to be
appropriate. Options shall be in such form and shall contain such terms and
conditions as required by the Plan and the Administrator. Each Option shall
include (through incorporation of provisions hereof or by reference in the
Option Agreement or otherwise) the substance of each of the following
provisions:
(a)
Term
. Each Option shall
cease to be exercisable ten (10) years after the date on which it is
granted.
(b)
Exercise Price
. The per
share exercise price for the Shares to be issued pursuant to exercise of an
Option shall be 100% of the Fair Market Value per Share on the date of
grant.
(c)
Vesting
. The
Administrator shall determine the exercise terms of all Options;
provided
,
however
, that except
to the extent provided by Section 13 hereof or as the Administrator may
determine to be applicable in the event that a Participant ceases to be a member
of the Board due to death, disability or mandatory retirement (if any), no
Option granted hereunder shall be exercisable at a rate faster than would permit
the Option to be exercised for more than 20% of the Shares of Common Stock that
are subject to such Option during any 12 month period commencing from the date
of grant.
(d)
Exercise Period
. Unless
otherwise determined by the Administrator:
(i)
subject to subsection (iii) below, in the event that an Optionee ceases to be a
Director for any reason other than death or Disability, his or her Options, to
the extent exercisable as of the date his or her services as a Director cease,
shall remain exercisable for a period of ninety (90) days, but in no event
longer than the term of the Option set forth in Section 9(a) above;
(ii)
in the event that an Optionee ceases to be a Director due to death or
Disability, his or her Options, to the extent exercisable as of the date his or
her services as a Director cease, shall remain exercisable for a period of
twelve (12) months, but in no event longer than the term of the Option set forth
in Section 9(a) above.
(iii)
in the event that an Optionee is removed as a Director for Cause, his or her
Options, to the extent not exercised as of the date of the Optionee’s removal,
shall be forfeited and shall not thereafter be exercisable.
10.
Method of Exercise; Rights as a
Shareholder.
(a)
Procedure for Exercise
.
An Option shall be deemed exercised when the Company receives: (i) written or
electronic notice of exercise (in accordance with the Option Agreement) from the
person entitled to exercise the Option, and (ii) full payment for the Shares
with respect to which the Option is exercised. Full payment may consist of any
consideration and method of payment authorized by the Administrator and
permitted by the Option Agreement and Section 10(b) of the Plan. Shares issued
upon exercise of an Option shall be issued in the name of the Optionee. An
Option may not be exercised for a fraction of a Share. Until the Shares are
issued (as evidenced by the appropriate entry on the books of the Company or of
a duly authorized transfer agent of the Company), no right to vote or receive
dividends or any other rights as a stockholder shall exist with respect to the
Shares, notwithstanding the exercise of the Option. The Company shall issue (or
cause to be issued) such Shares promptly after the Option is exercised. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the Shares are issued, except as provided in Section 13 of
the Plan. Exercising an Option in any manner shall decrease the number of Shares
thereafter available, both for purposes of the Plan and for sale under the
Option, by the number of Shares as to which the Option is
exercised.
(b)
Form of Consideration
.
The Administrator shall determine the acceptable form of consideration for
exercising an Option, including the method of payment. Such consideration may
consist entirely of:
(i)
cash;
(ii)
check;
(iii)
promissory note;
(iv)
other Shares;
(v)
consideration received by the Company under a cashless exercise program
implemented by the Company in connection with the Plan;
(vii) any
combination of the foregoing methods of payment; or
(vii)
such other consideration and method of payment for the issuance of Shares to the
extent permitted by Applicable Laws.
11.
Non-Transferability of
Options
. Unless determined otherwise by the Administrator, an Option may
not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any
manner other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Optionee, only by the Optionee. If the
Administrator makes an Option transferable, such Option shall contain such
additional terms and conditions as the Administrator deems
appropriate.
12.
Adjustments Upon Changes in
Capitalization
. Subject to any required action by the stockholders of the
Company, the number of shares of Common Stock covered by each outstanding Option
or Restricted Stock Award, and the number of shares of Common Stock which have
been authorized for issuance under the Plan but as to which no Options or
Restricted Stock Awards have yet been granted or which have been returned to the
Plan upon cancellation or expiration of an Option, as well as the price per
share of Common Stock covered by each such outstanding Option, shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock, or any other
increase or decrease in the number of issued shares of Common Stock effected
without receipt of consideration by the Company;
provided
,
however
, that
conversion of any convertible securities of the Company shall not be deemed to
have been “effected without receipt of consideration.” Such adjustment shall be
made by the Administrator, whose determination in that respect shall be final,
binding and conclusive. Except as expressly provided herein, no issuance by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock subject
to an Option or Restricted Stock Award.
13.
Corporate
Transactions
.
(a)
Dissolution or
Liquidation
. In the event of the proposed dissolution or liquidation of
the Company, each Optionee shall have the right to exercise his or her Option
until ten (10) days prior to such transaction as to all of the Shares covered
thereby, including Shares as to which an applicable Option would not otherwise
be exercisable. To the extent it has not been previously exercised, an Option
will terminate immediately prior to the consummation of such proposed
action.
(b)
Merger or Asset Sale
.
In the event of a merger or consolidation of the Company with or into another
corporation or any other entity or the exchange of substantially all of the
outstanding stock of the Company for shares of another entity or other property
in which, after any such transaction the prior stockholders of the Company own
less than fifty percent (50%) of the voting shares of the continuing or
surviving entity, or in the event of the sale of all or substantially all of the
assets of the Company, (any such event, a “
Corporate
Transaction
”), then, absent a provision to the contrary in any particular
Option Agreement, the Optionee shall fully vest in and have the right to
exercise each outstanding Option as to all of the Shares covered thereby,
including Shares which would not otherwise be vested or exercisable. In the
event that the Administrator determines that the successor corporation or a
parent of the successor corporation refuses to assume or substitute an
equivalent option, then the Administrator shall notify all Optionees that all
outstanding Options shall be fully exercisable for a period of fifteen (15) days
from the date of such notice and that any Options that are not exercised within
such period shall terminate upon the expiration of such period. For the purposes
of this paragraph, all outstanding Options shall be considered assumed if,
following the consummation of the Corporate Transaction, the Option confers the
right to purchase or receive, for each Share subject to the Option immediately
prior to the consummation of the Corporate Transaction, the consideration
(whether stock, cash, or other property) received in the Corporate Transaction
by holders of Common Stock for each Share held on the effective date of the
transaction (and if holders were offered a choice of consideration, the type
chosen by the holders of a majority of the outstanding Shares);
provided
,
however
, that if such
consideration received in the Corporate Transaction is not solely common stock
of the successor corporation or its parent corporation, the Administrator may,
with the consent of the successor corporation, provide for the consideration to
be received upon the exercise of the Option, for each Share subject to the
Option, to be solely common stock of the successor corporation or its parent
corporation equal in fair market value to the per share consideration received
by holders of Common Stock in the Corporate Transaction.
14.
Grant Agreement
. Each
grant of an Option or Restricted Stock Award under the Plan will be evidenced by
a document in such form as the Administrator may from time to time approve. Such
document will contain such provisions as the Administrator may in its discretion
deem advisable, including without limitation additional restrictions or
conditions upon the exercise of an Option, provided that such provisions are not
inconsistent with any of the provisions of the Plan.
15.
Amendment and Termination of
the Plan
.
(a)
Amendment and
Termination
. The Board may at any time amend, alter, suspend or terminate
the Plan.
(b)
Stockholder Approval
.
The Company shall obtain stockholder approval of any Plan amendment to the
extent necessary to comply with Applicable Laws.
(c)
Effect of Amendment or
Termination
. No amendment, alteration, suspension or termination of the
Plan shall impair the rights of any Participant, unless mutually agreed
otherwise between the Participant and the Administrator, which agreement must be
in writing and signed by the Participant and the Company. Termination of the
Plan shall not affect the Administrator’s ability to exercise the powers granted
to it hereunder with respect to Options or Restricted Shares granted under the
Plan prior to the date of such termination.
16.
Repricing of Options
.
Except in connection with a corporate transaction involving the Company
(including, without limitation, any stock dividend, stock split, extraordinary
cash dividend, recapitalization, reorganization, merger, consolidation,
split-up, spin-off, combination, or exchange of shares), the terms of
outstanding Options may not be amended to reduce the exercise price of
outstanding Options or to cancel outstanding Options in exchange for cash, other
awards or Options with an exercise price that is less than the exercise price of
the original Options without stockholder approval.
17.
Conditions Upon Issuance of
Shares
.
(a)
Legal Compliance
.
Shares shall not be issued pursuant to a Restricted Stock Award or the exercise
of an Option unless the exercise of such Option and the issuance and delivery of
such Shares shall comply with Applicable Laws and shall be further subject to
the approval of counsel for the Company with respect to such
compliance.
(b)
Investment
Representations
. As a condition to the exercise of an Option or the
issuance of Restricted Shares, the Company may require the Participant to
represent and warrant at the time of any such exercise or issuance that the
Shares are being purchased or acquired, as the case may be, only for investment
and without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required. Not in
limitation of any of the foregoing, in any such case referred to in the
preceding sentence the Administrator may also require the Participant to execute
and deliver documents containing such representations (including the investment
representations described in this Section 16(b)), warranties and agreements as
the Administrator or counsel to the Company shall deem necessary or advisable to
comply with any exemption from registration under the Securities Act of 1933, as
amended, any applicable State securities laws, and any other applicable law,
regulation or rule.
(c)
Additional Conditions
.
The Administrator shall have the authority to condition the grant of any Option,
the issuance of Shares pursuant to the exercise of an Option, or the grant of
any Restricted Shares, in such other manner that the Administrator determines to
be appropriate, provided that such condition is not inconsistent with the terms
of the Plan.
18.
Inability to Obtain
Authority
. The inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by the Company’s
counsel to be necessary to the lawful issuance and sale of any Shares hereunder,
shall relieve the Company of any liability in respect of the failure to issue or
sell such Shares as to which such requisite authority shall not have been
obtained.
19.
Reservation of Shares
.
The Company, during the term of this Plan, will at all times reserve and keep
available such number of Shares as shall be sufficient to satisfy the
requirements of the Plan.
20.
Stockholder Approval
.
The Plan shall be subject to approval by the stockholders of the Company. Such
stockholder approval shall be obtained in the manner and to the degree required
under Applicable Laws.
21.
Withholding; Notice of
Sale
. Each Participant shall, no later than the date as of which the
value of an Option or Restricted Stock Award or of any Shares or other amounts
received thereunder first becomes includable in the gross income of the
Participant for Federal income tax purposes, pay to the Company, or make
arrangements satisfactory to the Administrator regarding payment of, any
Federal, state, or local taxes of any kind required by law to be withheld with
respect to such income. The Company shall, to the extent permitted by law, have
the right to deduct any such taxes from any payment of any kind otherwise due to
the Participant. The Company’s obligation to deliver stock certificates to any
Participant is subject to and conditioned on any such tax obligations being
satisfied by the Participant. Subject to approval by the Administrator, a
Participant may elect to have the minimum required tax withholding obligation
satisfied, in whole or in part, by (i) authorizing the Company to withhold from
Shares to be issued pursuant to any Option or Restricted Stock Award a number of
Shares with an aggregate Fair Market Value (as of the date the withholding is
effected) that would satisfy the withholding amount due, or (ii) transferring to
the Company Shares owned by the Participant with an aggregate Fair Market Value
(as of the date the withholding is effected) that would satisfy the minimum
withholding amount due.
22.
Governing Law
. This Plan
shall be governed by the laws of the State of Delaware.
Exhibit
31.1
CERTIFICATION
I,
Jeffrey M. Jagid, certify that:
1. I
have reviewed this quarterly report on Form 10-Q of I.D. Systems,
Inc.;
2. Based
on my knowledge, this report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
3. Based
on my knowledge, the consolidated financial statements, and other financial
information included in this report, fairly present in all material respects the
consolidated financial condition, consolidated results of operations and
consolidated cash flows of the registrant as of, and for, the periods presented
in this report;
4. The
registrant’s other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
(a) Designed
such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this report is being prepared;
(b) Designed
such internal control over financial reporting, or caused such internal control
over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
(c) Evaluated
the effectiveness of the registrant’s disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
(d) Disclosed
in this report any change in the registrant’s internal control over financial
reporting that occurred during the registrant’s most recent fiscal quarter that
has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and
5. The
registrant’s other certifying officer and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of
directors (or persons performing the equivalent functions):
(a) All
significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to
adversely affect the registrant’s ability to record, process, summarize and
report financial information; and
(b) Any
fraud, whether or not material, that involves management or other employees who
have a significant role in the registrant’s internal controls over financial
reporting.
Date:
November 6, 2009
|
/s/
Jeffrey M. Jagid
|
|
Jeffrey
M. Jagid
Chairman
and Chief Executive Officer
(Principal
Executive Officer)
|
Exhibit
31.2
CERTIFICATION
I, Ned
Mavrommatis, certify that:
1. I
have reviewed this quarterly report on Form 10-Q of I.D. Systems,
Inc.;
2. Based
on my knowledge, this report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
3. Based
on my knowledge, the consolidated financial statements, and other financial
information included in this report, fairly present in all material respects the
consolidated financial condition, consolidated results of operations and
consolidated cash flows of the registrant as of, and for, the periods presented
in this report;
4. The
registrant’s other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
(a) Designed
such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this report is being prepared;
(b) Designed
such internal control over financial reporting, or caused such internal control
over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
(c) Evaluated
the effectiveness of the registrant’s disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
(d) Disclosed
in this report any change in the registrant’s internal control over financial
reporting that occurred during the registrant’s most recent fiscal quarter that
has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and
5. The
registrant’s other certifying officer and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of
directors (or persons performing the equivalent functions):
(a) All
significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to
adversely affect the registrant’s ability to record, process, summarize and
report financial information; and
(b) Any
fraud, whether or not material, that involves management or other employees who
have a significant role in the registrant’s internal controls over financial
reporting.
Date: November
6, 2009
|
/s/
Ned
Mavrommatis
|
|
Ned
Mavrommatis
Chief
Financial Officer
(Principal
Financial Officer)
|
Exhibit
32
CERTIFICATION
OF
CHIEF
EXECUTIVE OFFICER
AND
CHIEF
FINANCIAL OFFICER
PURSUANT
TO 18 U.S.C. 1350,
AS
ADOPTED PURSUANT TO
SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002
I,
Jeffrey M. Jagid, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report on Form
10-Q of I.D. Systems, Inc. for the quarter ended September 30, 2009, fully
complies with the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 and that information contained in such Quarterly Report on
Form 10-Q fairly presents, in all material respects, the financial condition and
results of operations of I.D. Systems, Inc.
I, Ned
Mavrommatis, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report on Form 10-Q of
I.D. Systems, Inc. for the quarter ended September 30, 2009, fully complies with
the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934 and that information contained in such Quarterly Report on Form 10-Q fairly
presents, in all material respects, the financial condition and results of
operations of I.D. Systems, Inc.
|
By:
/s/ Jeffrey M. Jagid
|
|
Jeffrey
M. Jagid
|
|
Chairman
and Chief Executive Officer
|
|
(Principal
Executive Officer)
|
|
Date: November
6, 2009
|
|
|
|
By:
/s/ Ned Mavrommatis
|
|
Ned
Mavrommatis
|
|
Chief
Financial Officer
|
|
(Principal
Financial Officer)
|
|
Date: November
6, 2009
|
The
foregoing certification is being furnished solely pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63
of Title 18, United States Code) and is not being filed as part of the Quarterly
Report on Form 10-Q of I.D. Systems, Inc. for the quarter ended March 31, 2009
or as a separate disclosure document.
A signed
original of this written statement required by Section 906, or other document
authenticating, acknowledging, or otherwise adopting the signature that appears
in typed form within the electronic version of this written statement required
by Section 906, has been provided to I.D. Systems, Inc. and will be retained by
I.D. Systems, Inc. and furnished to the Securities and Exchange Commission or
its staff upon request.